Risks Of A Foreign Environment

1442 Words6 Pages
Under a global environment, sometime it becomes necessary for an organisation to have an international view. For those companies who want to enlarge their size or expand their market, they may consider investing abroad as a possible choice. Usually, the decision is made under a proper estimation. But since there are many risks in a foreign environment, it may be hard for the company to make an evaluation. Basically Investors decide where to invest based on their perceived economic risks, political risks, and legal risk (Sandler and Enders 2004). So this essay will evaluate how these risks affect organisations decision when they want to invest abroad, try to find out whether there are good ways that company can use to reduce the effects of these risks and make a suitable decision.
To invest abroad, firstly company should concern about the effect of economic risk. The arguments on the effects are variance. On the one hand, there is a point of view showed that the FDI organizations are not influenced significantly by a country’s specific economic risk. The explanation for this is that important elements in companies’ evaluation of risks are already contained in the other variables (Bevan and Estrin 2004). On the other hand, some previous study shows there are different ways that economic risks can affect investment decisions through different ways. For instance, exchange rate risk, inflation risk and currency risk are all affect FDI organisation very much
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