What are the Risks?
Risks of instability associated with the ability of capital to migrate easily to different locations as a result of change in risk return configurations, indeed information, technology and other technological advances have significantly lowered the response time of capital and especially financial capital
 

The reactions to policy can be very destabilizing with large capital outflows heightening exchange rate pressure and weaknesses of the banking system
 

  Globalization also exposes countries to shocks occurring else where in the international economy. Several emerging markets in Asia, Latin America and Central Europe -felt some repercussions from Mexican, Asian and Russian Crisis.
 
Globalization also exposes developing countries to changes in the stance of monetary policy in industrial countries due to the changes in interest rate conditions in industrial countries, which will have an impact on relative attraction of investing in developing country financial instruments.
 
Globalization reduces certain degree of freedom that policy makers as countries must always take into account the international context in which their policies are implemented.
 
  “The most often used illustration in this context is the implications of globalization for taxation instruments. As factors of production become more mobile, large differences in tax incidence among countries can lead to migration of activities. At the same time they "over competition" in tax policy which through tax exemptions and concessions, might lead to a fragmented and inefficient tax system”.
   
  More Resources

Fischer, Stanley 2003 "Globalization and Its Challenges" Richard Ely Lecture presented in January 2003 at the American Economic Association Meeting in Washington, DC.
 

Schuurman, Frans J. Globalization and Development Studies: Challenges for the 21st century (ed.) (London: Thousand Oaks)
 
American University in Cairo (1998) Globalization: blessing or curse? (Cairo: American University in Cairo)