Major Factors Associated With Country Risks Essay

Why would you want to make a long-term investment for your company in the chosen country?

As previously identified, there are also “non-legal/extra-governmental” political risks which could bring unexpected upheaval to foreign firms. Macro political risks such as the threat of violence, corruption, war or military coup, political instability and terrorism are all direct threats to foreign investors.

A1. Global risks are usually predictable and have a high probability of occurrence but are often referred to as uncontrollable risks (Merna, 2008). Of the risks listed above, one that has more of a global aspect on marketplace activities is the political and regulatory risks. This would include potential losses from expropriation, nationalization, civil unrest, terrorism and significant changes to trade policy. Specifically,

The political risk of investing in developed countries is roughly comparable with the risks of investing in the developing countries.

However, the investment was not without risks. There are four types of risks in international business called cross-culture risk, country risk, currency risk and commercial risk. Cross-cultural risk refers to a situation or event where a cultural miscommunication puts some human value at stake. Country risk describes the potentially adverse effects on company operations and profitability holes by developments in the political, legal, and economic environment in a foreign country. Currency risk is the risk of adverse unexpected fluctuations in exchange rates. Commercial risk refers to potential loss or failure from poorly developed or executed business strategies, tactics, or procedures (Boter & Wincent, 2010). Investment in Rulmenti Grei, Timken might face the salient risks of political and economic instability. Romania’s economic growth was slower, inflation was higher, and the labor force was more volatile. Furthermore, there might be a risk of re-nationalization. It is said that economic risk analysis tells corporate leaders the ability of a particular country to pay its debt while political risk analysis tells them whether that country will pay its debt. Political risk measures the stability of individual countries through the

1. What is political risk and what are the most significant elements to be considered?

2. Some risks that are common between domestic and international funds are: losing money and management risk. Any investment has some type of risk. Losing money is the first risk that every investment has whether it is domestic or international. Management risk is the bad management decisions that a company makes. Some unique risks that only international funding has are: economic risk, country/regional risk, and currency risk. Currency risk is the chance that the value of a   foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in the currency exchange rates. Economic risk is the stability of a country’s economic. Country/regional risk is political, financial troubles, and natural disasters that will affect the value of securities issued by companies in foreign countries or regions.

Country risk refers to the risk that would either positively or negatively affect the future prospect of a given investment, depend on the possibility of occurrence of the political events (Bouchet et al, 2003). The upcoming in-out referendum on the UK’s membership of the European Union (EU) has caught the attention of people around the world. A number of debates about the UK should remain in or leave the EU has been held. Undoubtedly, the upcoming referendum could bring country risk exposure, particularly country-specific economic risk. It is impossible to know the exact answer before the referendum. However, the trade-off that the UK would face would be the same regardless of it is inside or outside the EU (Dhingra and Sampson, 2016).

The risk is sometimes referred to as sovereign risk. Primarily, political risks affectvarious aspects of an international business that hinders its growth. The political instability in acountry may make it difficult for multinational businesses to operate efficiently. This comes as aresult of the negative publicity that the political leaders create in the country. Political differences

We have to deeply consider about the financial risk that we are going to present as a business owner when expanding it to another country. Because it will cause a unfavorable return for your investment when the exchange between currencies. Sometimes you have to be waiting until it will getting access to the supplies and product you need to take to another country. as well your business can be taken less profit because of the tariffs and ship fees for the products on some

When investing internationally there are risks beyond the risk of individual securities or portfolios. There is liquidity risk, because it is often

Measuring a potential business venture has many aspects which the international manager must be aware of in order to convey the correct information back to the decision makers. Being ignorant to any of the aspects can lead to a false representation of the project, and hence an uninformed decision being passed. In order for a business to survive it must grow. For growth to be optimal, management must first be able to identify the most attractive prospective leads. The country as a whole, specifically geography, government, and financial aspects must be looked at in order to yield the best possible picture of the market a company wishes to enter. Concentration should be placed on gathering reliable facts

1. Political risk and country risk are challenges that must be strategically considered by multinational firms. What is one real-world firm that deals with political and country risk?

They claim that international capital mobility, or, the ability of investors to freely allocate capital around the globe, engenders promise, while simultaneously entailing peril. This paper will attempt to address the arguments of both sides to foster greater comprehension.

Political environment is significant to do business in other countries. There are different factors of political environment. These factors can influence the government decision making and other activities. For foreign investors every country set some rules and regulations. Investor need to maintain these rules and regulation to do business on certain country. Political factors can influence the government to change these regulations. So investors need to know the regulations and get the proper knowledge about political environment.