American Journal of Business Management, Economics and Banking 
ISSN (E): 2832-8078                               Volume 14, | July, 2023                                

 

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FINANCIAL MANAGEMENT SYSTEM'S EFFECTS ON GLOBAL 

ECONOMIC DEVELOPMENT PATTERNS  

Ammar Neamah Awada 

Al-Nahrain University, Collage of Information Engineering, Baghdad, Iraq 

Ammar69a@yahoo.com 

 

Anas Mahmood Ibrahim 

Al-Nahrain University, Collage of Information Engineering, Baghdad, Iraq 

anasmahmood.1981@gmail.com 

 

 

A B S T R A C T K E Y W O R D S 

The study examines the effects of key global economic growth trends, 

such as globalization, financialization, fractionalization, 

intellectualization, and socializing, on the financial system as a 

management object. The main outcomes of this influence include the 

emergence of qualitatively new financial services, products, and 

instruments; modifications to the mechanisms and volumes of the 

delivery of financial services under conditions of increased financial 

risks, increased instability, and cyclical development of financial 

markets; and threats of global financial crises. Due to the imbalance of 

cash flows, the financial system's separability from other economic 

sectors, and the need to reorient financial flows for sustainable 

development and the pursuit of new standards for investment and 

financial efficiency activities of economic subjects in the "nature-

production-society" system, it is difficult to bring the financial system 

into equilibrium. management into a true engine of the introduction of 

fresh concepts and innovations, and the effectiveness of reproductive 

processes. 

The change in the conceptual underpinnings of the development of a 

new paradigm of financial management in the twenty-first century led 

to a conclusion. The main principles of the formation of the financial 

management system in the changing economy include the dominance 

of the value paradigm as the basis of value-oriented financial 

management, the priority of adaptive financial management of changes 

by cycle phases, recognition as the primary criterion for the 

effectiveness of maximizing operating cash flows, increasing the role 

financial system, financial 

management, global 

megatrends, value-oriented 

financial management. 



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of financial managers in resolving agency conflicts, and transformation 

of information, among others. 

 

Introduction 

Reality of the concept. A radical theoretical rethinking of conventional scientific paradigms of 

economic processes as well as the theoretical and methodological substantiation of the modern content 

of financial management of domestic business in accordance with threats and challenges are urgently 

required in light of the profound transformations that have been dynamically taking place in the global 

environment since the beginning of the 21st century. The question of scientifically rethinking the most 

recent processes and phenomena in the system of the established conceptual apparatus with the aim of 

developing a modern concept of financial management, adequate to the dynamics of contemporary 

changes in the financial markets is raised in the context of financial globalization and increased market 

turbulence. 

The effectiveness of the financial system's influence on the socioeconomic development of society is 

largely dependent on the perfection of financial management methods and their compliance with 

contemporary needs, as evidenced by the experience of many countries, including both developed 

market economies and transformational ones. The validation of the conceptual underpinnings of the 

contemporary financial management system, as they relate to dynamic changes, uncertainty, and 

instability of the new geo-economic space, assumes significant significance in the context of the 

aforementioned (1,2) . 

First and foremost, just to learn more about the modern financial management system's evolutionary 

development and the influences that contributed to it. However, we also think that given the conditions 

of the new millennium's dynamic socio-economic transformations, as well as the intensification of crisis 

phenomena and upheavals, it is time to review and broaden the interpretation of the conceptual essence 

of paradigmatic shifts in the financial management system under the influence of global megatrends. 

This is because, in our opinion, doing so will enable a more in-depth understanding of the phenomenon 

at hand. 

There are gaps in the justification of managerial financial decisions from the perspective of taking into 

account the influence of contemporary global megatrends of economic development, according to an 

analysis of publications on the issues of financial management in the field of business at the current 

stage of economic development. At the same time, when fresh obstacles to the global financial system 

and genuine dangers from the split of the domestic economy emerge, Without taking into consideration 

the conditions that led to the emergence of global megatrends, their trajectory, and their effects on the 

multi-level system of financial relations, it is no longer possible to build a financial management 

strategy and tactics. Updated scientific research on the justification for significant changes in the 

financial management paradigm caused by global megatrends is being made in the plane above. As a 

result, the study's goal is to examine global megatrends in the context of how they affect the financial 

system as a management target and, using this as a foundation, to support the conceptual underpinnings 

of financial management while taking into account the profound paradigm shifts brought on by the third 

millennium's new circumstances (3).the major information being presented. Radical qualitative changes 

in the characteristics and value foundations of business and social life under the influence of large-

scale, long-term processes of world development are the causes of the transformational processes in the 

era of global changes that humanity is experiencing in the new millennium. These processes are referred 



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to as megatrends since they are long-term in nature as opposed to short-term local trends, global 

repercussions and a considerable influence on the development of new paths for a wide variety of 

economic relationships, including the paradigm of financial management for the new millennium. The 

book "Megatrends" by American futurist John, which was initially released in 1982, is where the phrase 

"megatrends" first arose (11). Following that, this phrase became extensively used in economic 

literature to describe the global macroeconomic development elements that have an impact on all human 

beings' enterprises, economies, societies, cultures, and personal lives (4). 

 

Research problem 

To reveal the theoretical underpinnings of the paradigmatic changes in the financial management 

system that occurred as a result of risks and difficulties in the global environment. 

 

Literature review  

Modern socioeconomic megatrends are characterized by a very rapid pace of civilizational 

advancement, large Modern socio-economic megatrends are characterized by a very rapid pace of 

civilizational advancement, notable tension and intensity, and major shifts in worldview markers under 

the mutually determined effect of a number of causes. The primary megatrends that define the current 

stage of economic development cannot be distinguished or reduced to a single concept in the scientific 

discourse. Among the several viewpoints on how to evaluate megatrends, we will single out some 

diametrical ones in order to expand the vision of the investigated problem. Thus, in particular (1) refers 

to the main megatrends of economic development: 1) globalization; 2) financialization; 3) 

informatization; 4) intellectualization; 5) socialization. Wikipedia gives a slightly different 

configuration of the main world megatrends of economic development (8): 1) globalization; 2) 

accelerating the pace of social development; 3) regionalization; 4) network space; 5) non-state factors; 

6) polycentrization; 7) universalization of migration flows; 8) crisis of global leadership (10).   

      Consider megatrends in historical retrospect, and in this plane, single out the so-called "yesterday 

of the day" megatrends that were relevant at the end of the 20th century and are still relevant in the 21st 

(transition from an industrial to an information type of society; development of Internet technologies 

and electronic commerce; outsourcing, franchising, leasing, etc. popular business models that 

significantly expanded the sphere influence; demography, urbanization linked to raising living 

standards and many other things).Despite having various scientific methods, the classifications listed 

above all take into account the crucial effects of globalization and the informationalization of society 

on the global economic system as it moves from an industrial to a post-industrial economy, In addition, 

they correctly emphasize the need to consider the connection between dynamic changes in the structural 

organization of the economy and the strengthening of the development of the financial sector and the 

increase in volatility of the movement of financial resources, on which most scientists do not always 

pay attention [6]. This is done by justifying the aforementioned stage of the genesis of economic 

systems. In light of this study's issue, the recommended classification of contemporary megatrends in 

economic growth, is more justified because the financialization megatrend, which is characterized by 

profound changes in the structure of the contemporary global economy in relation to the hypertrophied 

dominance of the financial sector, is directly influenced by the financial sector's rapid evolution and 

growth in importance, which cannot help but have an impact on new vectors of the development of the 



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financial management system. We described the main global megatrends' contents in Table 1 and noted 

their management-related impact on the financial system. 

Table No (01): The influence of the main megatrends of economic development on the financial 

system as an object of management 

The main megatrends Essential signs Influence on the financial system as an object of 

management 

Globalization Formation of a new geo-

economic space controlled by 

transnational capital 

The emergence of qualitatively new services, 

financial products, and financial instruments as well 

as the actualization of global coordination of financial 

policies of various states as a condition for the 

stability of the global financial system are all 

examples of how the financial sphere has become 

more global under the influence of communication 

and computer technologies. 

Financialization Cardinal shifts in the structure 

of the modern world economy 

are associated with the 

hypertrophied dominance of the 

financial sector. 

Financial risks have increased, financial markets have 

become more volatile and cyclical, there is a threat of 

a global financial crisis, and it is challenging to bring 

the financial system to an equilibrium state because of 

the imbalance in money flows and the separation of 

the money supply from real security. 

Informatization Large-scale use of information 

and computer technologies in 

all spheres of life, transition to 

an information society. 

Consolidation of space and a reduction in the amount 

of time needed to perform international financial 

transactions, "virtualization" of tools used to conduct 

financial transactions, and a definite rise in the 

demand for cyber threat defense. 

Intellectualization Radical increase in the role of 

human capital as a driving force 

of socio-economic development 

thanks to the realization of its 

creative potential. 

The success of reproduction processes, the 

introduction of new ideas, and innovations are all 

guaranteed by the high quality of management in 

general and financial management in particular. 

Socialization Subordination of economic 

processes to the interests of 

development person and society 

as a whole. 

Updating the search for new metrics for gauging the 

financial and investment success of economic entities 

operating in the "nature-production-society" system in 

light of resource limitations and the need to integrate 

economic, humanistic, and ecological factors 

      

The evolution of the present financial management system's formation should be taken into account 

while analyzing the effects of the aforementioned elements on it. Table 2 summarizes the key phases 

of the development of scientific methods to general management and the impact of well-known 

scientific schools on the advancement of finance management. 

    The scientific methodologies included in the table, which are the most advanced in the literature on 

economics, investigate the management structure as a subject. Simultaneously, new methods for 

managing complex systems have lately emerged, including optimization, synergistic, transdisciplinary, 

reflexive, "people-centered," and others. As the analysis demonstrates, changes in the strategic 

resources required for the development of the economy and the satisfaction of fundamental social needs 

in the process of the genesis of economic systems heavily influence the evolution of the development 

of financial management and its complications its tasks in the process of civilizational progress. For 

example, T. V. Melnyk specifically mentions raw commodities as such strategic resources in the pre-



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industrial economy, capital financial in the industrial sector, and knowledge in the post-industrial 

economy (9) .The main management tasks involved the rational formation, distribution, and use of 

financial resources while taking into account the priorities of a particular historical stage. At the same 

time, because the need for financial management emerged already in the industrial economy, its 

evolution happened much faster. Thus, Brigham E. F., an American scientist, points out (3) that the 

legal aspects of the merger of various companies, the formation of new firms, and the emission of 

various securities for the purpose were already the main subject of the study of financial management 

at the beginning of the 20th century in the USA due to the influence of the rapid development of 

commodity markets and the need to concentrate significant amounts of capital for the real sector of the 

economy. During the Great Depression of the 20th century, financial markets expanded along with a 

rise in the economy's volatility. 

      In the post-crisis era (the 1950s and 1960s of the 20th century), the emphasis of financial 

management accordingly shifts to the adoption of optimal financial decisions regarding the formation 

of the capital structure and the justification of rational directions for its placement with the aid of 

optimization models. This is because the subject of financial management becomes more complicated 

as a result of the development of the principles of anti-crisis financial management of companies. Since 

financial management has been evolving over the past century, its subject has expanded, financial 

processes have improved, and instruments have become more complex (5,7,8). 

Table No (02): Systematization of scientific management methodologies and their impact on the 

creation of the conceptual framework for financial management 

The name of the 

scientific approach 

The essence of the 

approach 

Schools of 

management that 

followed this 

approach and their 

main representatives 

Influence on the 

development of 

financial management 

Traditional 

approach 

Work, people, 

administration, 

motivation, and system 

company management 

are all examples of 

management 

components. The 

primary focus of the 

study is labor efficiency 

at lower management 

levels. 

Classical (traditional) 

school of 

management. 

Representatives: 

F. Taylor, H. 

Emerson, H. Ford, S. 

Thompson, L. Allen, 

M. Follett, 

R. Shelton and others. 

The groundwork has 

been laid for 

improving the 

effectiveness of 

employee interaction 

in the financial 

services industry and 

rationalizing 

company operations. 

Functional 

(process) approach 

Goal-setting, planning, 

organizational work, 

motivation, and control 

are all parts of the 

management process. 

The fundamental ideas 

and duties of 

Administratively 

functional school of 

management. 

Representatives: A. 

Fayol, J. Mooney, A. 

Reilly, H. Koontz, S. 

The groundwork for 

effective financial 

management has been 

established. 



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management are 

investigated. 

O'Donnell,C. Bernard 

and others. 

A systematic 

approach 

The company is viewed 

as a system with input, 

output, feedback, and 

influences from outside 

sources. 

Classical (traditional) 

school of 

management. 

Representatives: 

F. Taylor, H. 

Emerson, H. Ford, S. 

Thompson, L. Allen, 

M. Follett, 

R. Shelton and others. 

The necessary 

conditions have been 

established for 

comprehending 

financial management 

as a system of rational 

financial 

management. 

Situational 

approach 

Depending on the 

specific situation, 

management techniques 

are chosen, taking into 

account the influence of 

the most significant 

situational aspects. 

Classical (traditional) 

school of 

management. 

Representatives: 

F. Taylor, H. 

Emerson, H. Ford, S. 

Thompson, L. Allen, 

M. Follett, 

R. Shelton and others. 

The groundwork has 

been laid for 

improving the 

effectiveness of 

employee interaction 

in the financial 

services industry and 

rationalizing 

company operations. 

 

     The financial management system has undergone significant changes as a result of the new economic 

realities that have emerged since the turn of the 21st century, which have led to a need to reconsider its 

conceptual underpinnings in the context of paradigmatic shifts under the influence of the global 

megatrends shown in Table 1. Appropriate dynamics of contemporary changes in economic processes 

are required to establish a current idea of financial management.  

     The analysis of this problem enables us to draw the conclusion that as the complexity of the 

international financial markets and the instability of economic processes rise, entirely new objectives 

emerge and, under the impact of the aforementioned factors, a complex of financial management duties 

are formed. In addition, the importance of equity capital and long-term sources of funding for economic 

organizations is particularly expanding as economic crisis occurrences become more prevalent and it 

becomes harder to maintain financial stability.  

     However, operating cash flow, which determines objectively the requirement for its synchronization 

with capital needs in each particular period, is the primary measure of the efficiency of the use of 

invested capital as opposed to net profit. To support managerial financial decisions, it is advisable to 

employ operating cash flow and the calculation of all financial coefficients. 

Conclusion 

     The five main global megatrends of economic development—globalization, financialization, 

informationalization, and intellectualization—cause specific changes in the financial system as an 

object of management, which are significant to take into account when conceptualizing financial 

management principles in the age of global changes: the emergence of qualitatively new financial 

services, financial products, and financial instruments; changing the mechanisms and volumes of 

financial services provision in response to rising financial risks, increased market instability and 



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cyclicality, and threats of a global financial crisis; the inability of the financial system to reach 

equilibrium due to the imbalance of cash flows and the separation of the money supply from real 

security; the consolidation of space and reduction of time spent on conducting international financial 

transactions; the "virtualization" of financial instruments; and the objectively growing need for 

protection against cyber threats; the need to reorient financial flows to sustainable development and 

look for new metrics for the effectiveness of investment and financial activities of economic entities in 

the "natural production-society" system. the transformation of financial management into a real one as 

the driver of the efficiency of reproduction processes, the introduction of new ideas and innovations. 

    The primary focus of financial managers of businesses should be on resolving a complex of 

management tasks that have a new relevant content in light of the impact of the aforementioned 

megatrends: 

❖ look for ways to make the most of the limited financial resources available and proper 

justification of recommendations for investing money in assets that will generate the best return with 

the least amount of risk. 

❖ management of the company's strategic liquidity through prudent cash flow budgeting. 

❖ management of the firm's value through the long-term expansion of its value and the discovery 

of new prospects for the creation and distribution of financial resources, both of which can contribute 

to the rise in the total value of capital. 

❖ adaptive risk management to conditions of economic process development that are volatile, 

heterogeneous, unpredictable, and non-linear. 

❖ Based on understanding of the psychology of consumer behavior with regard to financial 

products and services, behavioral financial management. 

     The financial manager becomes a key figure and an integrator of the value (cost) of the company in 

the new dynamic conditions of the development of global financial markets, where the primary strategic 

resource is no longer financial capital but rather the knowledge and experience of specific managers 

regarding the use of innovative financial mechanisms, tools, technologies, and business processes. 

     At the same time, the financial manager becomes a participant in agency conflicts as a result of the 

existing conflict between his interests as an employee (even though he is a member of the company's 

top management) and the interests of the owners. As a result, the effectiveness of financial management 

in the context of value-oriented management directly depends on managers' capacity to avoid conflict 

and align the interests of all parties involved in financial trading. Additionally, anti-crisis finance 

management should be incorporated into the business' security system as a crucial instrument for 

maintaining sustainable development in times of amplified economic volatility. 

 

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