Political Risk (Matt)

Question 1

What events determine political risk?

Answer 1

• Conflict and violence
• Terrorism and kidnapping
• Property seizure
• –Confiscation (forced transfer of assets to the government without compensation)
• – Expropriation (forced transfer of assets to the government with compensation)
• –Nationalisation (forced government takeover of an entire industry, most common)
• Policy changes
• Local content

Question 2

What is political risk?

Answer 2

It is a type risk businesses face when making decisions. Changes in government, decisions and agendas have a major impact into the profitability and / or survival of business activities and decisions.

Question 3

What are some strategies to minimise political risk?

Answer 3

PARTNERSHIPS

LOCALISATION
(adapting products and services to meet the individual country’s culture and expectations)

DEVELOPMENT ASSISTANCE 
(aid / support for infrastructure)

LOCAL EQUITY/DEBT (involving local businesses and groups)

INSURANCE

Question 4

What is Sharia law?

Answer 4

Laws based on religious or philosophical teaching. Each country’s interpretation is different

Question 5

True or false? When it comes to managing political risk, one size fits all.

Answer 5

False.

The level of risk and the strategies to minimise it is highly dependent on the operations and type of business.

Question 6

How do you manage political risk?

Answer 6

AVOIDANCE
(not recommended)

ADAPTATION
(partnerships, localisation, development assistance, insurance)

INFORMATION GATHERING
(internal info, agencies that specialise in political risk)

INFLUENCING POLITICS
Through lobbying

Question 7

What are some ethical issues?

Answer 7

• Exploiting legal loopholes
• Minimising payouts to victims due to your negligence
• Marketing harmful products
• Responsible to only the bottom line / shareholders
• Social responsibility

Question 8

What is common law?

Answer 8

Laws based on acts of parliament or precedents set by the courts. Australia uses this system.

Question 9

What is Civil law?

Answer 9

It is a codified system of law that sets out a comprehensive system of written law. Europe, except for the UK and Ireland use this.

Question 10

What are the international legal systems?

Answer 10

• Civil law
• Common law
• Sharia law