Final answer:
The U.S. subprime mortgage crisis was caused by the failure of unregulated financial assets. To safeguard your business against an emerging financial crisis, maintain a diversified portfolio, monitor financial positions, and maintain strong relationships with banks.
Step-by-step explanation:
The U.S. subprime mortgage crisis was caused by several factors. One central factor was the creation and failure of unregulated financial assets, such as collateralized mortgage obligations (CMOs) and credit default swaps (CDSs). These assets were rated as safe by credit rating agencies, but their value declined when housing prices fell and mortgage payments became difficult for borrowers.
To safeguard your business against the impact of an emerging financial crisis, there are several measures you can take. First, maintain a diversified portfolio of assets to reduce your exposure to any single investment. Second, regularly monitor and stress test your financial positions to identify potential vulnerabilities. Finally, maintain a strong relationship with your bank and maintain adequate liquidity to ensure you can meet your financial obligations.
For example, a financial manager could diversify their investment portfolio by investing in a combination of stocks, bonds, and real estate assets. They could also stress test their portfolio by simulating various economic scenarios to determine the potential impact on their investments.