3) Political risk is classified into three distinct categories such as firm-specific risks, country-specific risks, and global-specific risks. It is crucial for multinational enterprises (MNE) to accurately identify, measure, and manage these risks if they want to be successful.
a. Firm-specific risks are known as micro risks; these political risks impact the MNE at the project or corporate level. The main political firm-specific risk is called governance risk and this arises due to goal conflict between an MNE and its host government. All MNEs should have in-house political risk analysts that relate the macro risks attributes to specific countries to the particular characteristics and vulnerabilities . Even with the best possible firm-specific
Country-specific risks are known as macro risks; these political risks impact the MNE at the project or corporate level but originate at the country level. The two main types of risks in this category are transfer risk and cultural and institutional risks. Transfer risk concerns mainly the problem of blocked funds, but also peripherally sovereign credit risk. Whereas, cultural and institutional risks spring from ownership structure, human resource norms, religious heritage, nepotism and corruption, intellectual property rights, and protectionism . An example of country-specific risks was witnessed recently when Nepal was under fire for its violation of labour laws. Nike was largely affected by this and they had to justify and prove that they were complying with all labour laws. Consumers specially in North America were worried about buying products that were made in a country with poor labour laws and were thinking of boycotting Nike. Furthermore, the financing issue related to country-specific risks is blocked funds. The financing issue associated with blocked funds is “when a government runs short of foreign exchange and cannot obtain additional funds through borrowing or attracting new foreign investment, it usually limits transfers of foreign exchange out of that country.” Management can consider blocked funds in their capital budgeting analysis. Temporary blockage of funds normally reduces the expected net present value and internal rate of return on a proposed
Global-specific risks are those political risks that affect the MNE at the project or corporate level but are originated at the global level. Examples are terrorism, the anti-globalization movement, environmental concerns, poverty, and cyber attacks. For instance, the recent terrorist bombing in Brussels have disrupted the economic environment in Europe. The GBP/USD pair fell by the most in a month amid Brussels attacks and it could potentially fall further. This FX risk impacts all the businesses that are dealing with GBP/USD currency pair. In order to manage global-specific risks, an MNE should adopt a crisis plan to protect is employees and property and to secure its supply chain integrity. However, the MNE largely relies on government to protect its citizens and firms from global-specific threats. In case of global-specific risks there are no particular financing issues; no MNE has the tools to avert terrorism, anti-globalization, cyber-attacks, poverty etc. However, some of the minor financing issues are interruption of cross-border supply chain management, financing project with weaker environmental controls, defending their stand for working with corrupt countries
The use of propaganda is very common in not only politics, but in everyday media. Politician’s use propaganda as a way to persuade American people to believe that what they are saying and what they say they are going to do is the truth. The use of persuasion is very common and is used by practically everybody. The government, department stores, and even celebrities are guilty of using propaganda on the average people. Having knowledge on what types of propaganda is being used on you are very important. This is important because without this knowledge, politicians and other people will use propaganda on us to persuade us to do what they want, so by analyzing the Democrats and Republicans websites people will be able to see what types of propaganda
Throughout Federalist 10, James Madison argues that we must allow people to separate into groups according to their needs and beliefs regarding the political system of our country. These factions will protect interests and create an elevated government comprised of the most knowledgeable and educated men to protect the citizenry. His arguments reflect his status as a wealthy and educated landowner that must protect himself in the face of the common people. I will argue that Madison’s argument is flawed, which he alludes to in his writing, because he neglects to acknowledge that people are self-interested and therefore, morally corrupt. This self-interest will be the downfall of Madison’s government as private interests take root and the will of the people is ignored in all places but elections.
International investing is something that many investors find that they can benefit from for many reasons. Two of the main reasons why investors choose to invest in foreign markets are growth and diversification. Growth allows investors the potential to take advantage of new opportunities in foreign emerging markets. International markets can potentially offer opportunities that might not be available in the United States. Diversification allows investors to spread out their risk to different markets and foreign companies other than those just in the United States allowing them to potentially create larger returns on their investment as well as reducing risks. (U.S. Securities and Exchange Commission, 2012) While investing internationally can be a very lucrative and rewarding decision, there are also extra risks involved with investing internationally. One of the main risks that international investors encounter is foreign exchange risk also known as currency risk. Currency risk is a financial risk that is created by contact with unforeseen changes in the exchange rate between two currencies. These changes can cause unpredictable gains or losses when profits from investments are converted from a foreign currency to the United Stated dollar. There are precautions that can be taken by investors to potentially lower their risk of currency value fluctuations and other risk factors that are present in international investing. (Gibley, 2012)
Firm-specific risks include Business Risk, Liquidity Risk, Financial Risk, Political Risk, Tax Risk, Credit Risk and Call Risk. Business Risk results from the probability that a company will experience
How does this case illustrate the threats and opportunities facing global companies in developing their strategies?
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
This is a publicly traded company in the US that has been ding quite well in the recent years. The company’s 10k filing for the year 2014. From this statement, the risks facing the company will be identified classified and suggestions made on how best to mitigate them in the subsequent areas. There are various areas that the risks can arise based on the company’s 10k filling (Mertz, 1999).
Multinational enterprise (MNE) is “a company that is headquartered in one country but has operations in one or more other countries” (Rugman and Collinson 2012, p.38) that has at least one office in different countries but centralised home office. These offices coordinate global management in the context of international business. MNEs have increasingly essential influence on the development of the global economy and coordinate with other companies in different business environments. However, there are many issues involved with how MNEs operate well overseas, especially in emerging markets (EMs) (Cavusgil et al., 2013, p.5).
Other types of exchange rate risks are translation risk and so-called hidden risk. The translation risk relates to cases where large multinational companies have subsidiaries in other countries. On the financial statement of the whole group, the company may have to translate the assets and liabilities from foreign accounts into the group statement. The translation will involve foreign exchange exposure. The term hidden risk evolves around the fact that all companies are subject to exchange rate risks, even if they don’t do business with companies using other currencies. A company that is buying supplies from a local manufacturer might be affected of fluctuating foreign exchange rates if the local manufacturer is doing business with overseas companies. If a manufacturer goes out of business, or experience heavy losses, it will affect all the companies it does business with. The co...
Some include risks at the enterprise level, managing risks in complex projects and dealing with turnarounds and large capital projects. Liu, Zou, & Gong (2013) explore how enterprise risk management (ERM) may influence the ability and performance of project management risk (PRM) by considering the features of the construction industry, its businesses and projects. Managing risks within projects such as these has become an important process to achieve project objectives in terms of the scope, time and cost. The results show that enterprise risk management can positively influence the implementation of project risk management. This can be achieved through implementing a risk focused culture, setting up risk management departments and setting up risk procedures. This will help control the project risk and improve the performance of project risk management. Communicating the concerns with other team members can help identify the risks earlier on rather than later in the development of the project. If the Stakeholders and managers involved are satisfied then the project outline becomes a
Identify the potential risks which affect the company and manage these risks within its risk appetite;
As has been discussed before, risk identification plays an important part in the risk such as unique, subjective, complex and uncertainly. There are no two identical leaves in the world; similar, there are no two exactly the same risk either. Hence the best risk manger could not identify risk completely. Besides, risk identification assessment is done by risk analysts. As the different level of risk management knowledge, practical experience and other aspects between individuals, the result of risk identification may be difference. Furthermore, the process of identifying risk is still risky. Once risks have been identified, corporations have to take actions on limiting risky actions to reduce the frequency and severity of risky. They have to think about any lost profit from limiting distribution of risky action. So reducing risk identification risk is one of assessments in the risk
A socio-political issue can be viewed as any matter that touches on both the social and political aspects of a given society. In other words, it is how the political issues through various policies or laws affect the general social facets. Examples of socio-political issues that are evident in the American society today include immigration, health, and gun control among others. Perhaps the most prevalent of these socio-political issues is immigration, which has received much attention especially due to the current presidential race (Trump). The question remains whether immigrants without valid documents should be transported back to their home countries or be granted amnesty has been the source of differing ideologies. The media has not been spared of this spectacle as various medium outlets have been vigilant airing any up-to-the-minute occurrence related to immigration.
What Is Politics On hearing the word politics, what usually springs to mind are images of government, politicians and their policies or more negatively the idea of corruption and dirty tricks. The actual definition seems to have been obscured and almost lost by such representations and clichés that tend not to pinpoint the true essence, which defines this thing, called politics. In order to make an attempt at a definition of politics a systematic approach is required. To begin with, a brief historical overview will be considered, to understand the origins of politics. Following this, different core concepts, which are imperative to a definition of politics, will be discussed, in the hope to discover a true and fair interpretation of the word politics.
The political environment can affect organizations. Political components influence buyer certainty and purchaser and business spending. Stability of political environment is essential for organizations