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Navigating Political Risks in Global Business

The document discusses various political risks that global businesses may face and strategies to mitigate those risks. It outlines factors like the sovereignty of nations, stability of governments, and potential political risks including confiscation, expropriation, and controls on trade, taxes, prices, and labor. It recommends assessing political vulnerability based on a product or industry's importance to a nation. It also suggests forecasting political risk by developing contingency plans, an intelligence network, and databases to predict issues. Finally, it provides strategies for reducing vulnerability such as being a good corporate citizen, benefiting the local economy, and using joint ventures or licensing agreements.

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Asim Khatiwada
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236 views8 pages

Navigating Political Risks in Global Business

The document discusses various political risks that global businesses may face and strategies to mitigate those risks. It outlines factors like the sovereignty of nations, stability of governments, and potential political risks including confiscation, expropriation, and controls on trade, taxes, prices, and labor. It recommends assessing political vulnerability based on a product or industry's importance to a nation. It also suggests forecasting political risk by developing contingency plans, an intelligence network, and databases to predict issues. Finally, it provides strategies for reducing vulnerability such as being a good corporate citizen, benefiting the local economy, and using joint ventures or licensing agreements.

Uploaded by

Asim Khatiwada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

The Political Environment

The Sovereignty of Nations A sovereign state is independent and free from all external control. Government has the power to grant or restrict business.

The Stability of Government


Government policies can change. Philosophies of major political parties affect operations. Economic nationalism may make foreign trade difficult.

Political Risks of Global Business


Confiscation Expropriation Domestication Economic Risks
Exchange Controls Tax Controls Local-Content Laws Price Controls Import Restrictions Labor Problems

Political Sanctions Political and Social Activists Violence and Terrorism Cyberterrorism

Assessing Political Vulnerability


Essential products that contribute to a countrys national goals are likely to receive favorable political attention, while those considered nonessential may receive unfavorable attention.

Forecasting Political Risk


Decide if risk insurance is necessary. Devise an intelligence network and an early warning system. Develop contingency plans for unfavorable future political events. Build a database of past political events for use in predicting future problems. Interpret the data gathered by a companys intelligence network in order to advise and forewarn corporate decision makers about political and economic situations.

Reducing Political Vulnerability


Be a good corporate citizen. Contribute to the country by:
improving their balance of payments using locally produced resources transfer capital, technology or skills to them create jobs make tax contributions

Political payoffs (generally illegal)

Good Corporate Citizenship


It is a guest in the country and should act accordingly. The profits of an enterprise are not solely the companys; the local national employees and the economy of the country should also benefit. A fluency in the local language goes far in making sales and cementing good public relations. The company should try to contribute to the countrys economy and culture with worthwhile public projects. It should train its executives and their families to act appropriately in the foreign environment. It is best not to conduct business from the United States but to staff foreign offices with competent nationals.

Strategies to Lessen Political Risk


Joint Ventures Investment Base Expansion Licensing Planned Domestication

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