Any company interested in a presence in the international market needs to be wary of sensitivity related to environmental concerns, human rights, and economic justice. A company’s negligence relating to any of those factors can be detrimental to its investment and reputation and consequently to the whole enterprise. At the same time, globalization enables and compels international business to seek investment opportunities in developing countries to maintain growth and competitive advantage. It has been observed that there are very high growth opportunities in emerging markets, provided an investor can understand and manage the risk. Therefore, there is a growing demand in the business world for political risk analysis, which would provide knowledge and assessment of potential harm to business operations arising from political behaviour in different countries. The external political environment is now increasingly recognized by MNCs as a crucial factor which has led to an increase in emphasis on political risk assessment as a managerial function (Yin, Sikorski & Phuong, 2003). Political risks faced by firms can be described as the risk of a strategic, financial, or labour loss for a firm as a result of macroeconomic and social policies or events related to political instability such as terrorism or war. Discuss, with examples, any FOUR (4) advantages for firms investing in other countries to undertake a Political Risk Analysis. Propose ONE (1) tool or methodology to identify, assess, and mitigate potential risks identified.
Any company interested in a presence in the international market needs to be wary of
sensitivity related to environmental concerns, human rights, and economic justice. A
company’s negligence relating to any of those factors can be detrimental to its investment and reputation and consequently to the whole enterprise. At the same time, globalization enables
and compels international business to seek investment opportunities in developing countries
to maintain growth and competitive advantage. It has been observed that there are very high
growth opportunities in emerging markets, provided an investor can understand and manage
the risk. Therefore, there is a growing demand in the business world for political risk analysis,
which would provide knowledge and assessment of potential harm to business operations
arising from political behaviour in different countries. The external political environment is now
increasingly recognized by MNCs as a crucial factor which has led to an increase in emphasis
on political risk assessment as a managerial function (Yin, Sikorski & Phuong, 2003). Political
risks faced by firms can be described as the risk of a strategic, financial, or labour loss for a
firm as a result of
such as terrorism or war.
Discuss, with examples, any FOUR (4) advantages for firms investing in other countries to
undertake a Political Risk Analysis. Propose ONE (1) tool or methodology to identify, assess,
and mitigate potential risks identified.
Step by step
Solved in 3 steps
