U3 Assessing Global Political Risks

Question 1

risk of general political instability

Answer 1

• if serious enough investor withdraw
• hesitation about Canadian projects overseas

Question 2

Ownership risk

Answer 2

• operations threatened by government takeover or expropriation, owners may lose their offshore property
• aka protectionism and nationalization of business

Question 3

Operation risk

Answer 3

government policies of host country may impede business operation like finance, marketing, or property

Question 4

transfer risk

Answer 4

When policy results in currency devaluation or economic downtime which can affect a company’s ability to transfer capital out of the host country

Question 5

repatriation of earnings

Answer 5

When a company creates wealth in another country it may be forced to return a considerable amount to the country’s government

Question 6

questions for companies to predict the possibility of risk

Answer 6

1. is terrorism part of the political landscape?
2. could extremist group pose a danger to the general stability of society?
3. has there been a wishdrawl of freedoms?
4. what, if any, is the military’s role in government? if it is in power, how firm is its grasp on power?
5. is corruption part of the business ethic? could a company find itself having to maker higher and higher payments to officials?
6. could religious or ethnic pressures lead to civil strife and endanger employees or property?

Question 7

evaluating political risks

Answer 7

• what are the chances of political and economic instability in the host country over the next five years?
• what agreements are in place between the canadian government and the host government regarding canadian investments?
• how committed is the current government to the rules of ownership rights?
• when is the next election or how long will the current government stay in place?
• if a new government were to emerge, how would its platform and ideology change the current state of business affairs?
• would a new government be likely to propose changes in policies that would affect the country’s way of doing international business?
• how would changes in government affect the profitability and safety of an international project?

Question 8

consequences of terrorism

Answer 8

• occur when least expected and becomes a greater concern when open borders make it easier for terrorists to carry out their plans
• when a terrorist attack takes place it not only instills fear into people but it also had many other negative consequences economy and its businesses
• other things are affected as well like transportation, security, and travel

Question 9

evaluating legal concerns

Answer 9

• laws and regulations differ from one country to the next
• when doing business in a foreign country, you must obey the laws from that country make work safe for workers
• makes cost greater for business