5 Flashcards
Ownership control risks
Confiscation Expropriation Nationalization (after conf or exprop) Domestication Privatization
Types of political risk
Ownership control
Transfer risk
Operational control
Confiscation
Govt takes control without compensation
Expropriation
Govt takes over but compensates
- prompt payment - acceptable current - market value
Nationalization
After conf or exprop, govt runs bus
Domestication
Gradually reduce owners control by:
Transfer of equity
Requiring locals be hired
Require local goods for production
Privatization
Share issue- sell market shares
Asset sale- sell assets
Voucher - dist shares to all citizens
Transfer risks
Profit repatriation restrictions Currency exchange controls Restrict mgmt transfers Curb movement of technology (in/out) Curb transfer of products/services
Operational control risks
Production Purchasing Financing Marketing Human resources Logistics
Political risk mgmt
Defensive
Integrative
Defensive risk mgmt
Structure operations so that host can only minimally impact
Make it difficult for host country intervention
Defensive risk mgmt - finance
Finance - minimize equity and locally retained earnings
Integrative political risk mgmt - financial
Fair capital contribution to joint venture
Un exploitative short term currency flows
Fair transfer pricing
Integrative political risk mgmt - management
Prep and employ locals in positions of responsibility
Prep expats for cultural sensitivity
Open communication with local authorities
Integrative political risk mgmt - marketing
Fair prices
Promote accordingly with local culture
Distribute to low demand areas
