Liberia has drastically been destroyed by more ten years warfollowed by political instability. We know that civil wars per se, are responsible of destruction of property, lost sales, disruption of production, increased security costs, and lower productivity, to name a few. Political upheavals are generally protracted. They may occur decades ago and still have harmful impact on the socioeconomic situation and on foreign firms willingness to invest.
International businesses are subject to certain financial and political risks that most domestic businesses will never even have to consider.
Foreign currency exchange rates, political climates and events, international trade laws and tariffs, and an array of unexpected variables must all be accounted for prior to the first day of business.
Logistical Risk When purchasing goods and materials necessary to the operation of your overseas business, there may be uncertainty about the supplier's ability to deliver on time and within the budget.
One way to mitigate this risk is to diversify your supply chain by spreading orders over several suppliers. Consider taking this method a step further by using suppliers that are distributed across several nations or regions to reduce the risk of unforeseen problems, such as issues with weather.
This method may work best for large companies that have the resources and personnel to handle the detailed work and scouting involved.
Small businesses may be able to use a similar approach, however, by having a system of fail-safe measures that include having a backup supplier for every existing supplier. Regulatory Risk Environmental regulations have become increasingly significant to international companies in recent years.
They can affect the expense of operation and expansion by prioritizing the health of the planet over the bottom line. Many countries around the world have higher environmental standards than the United States and thus are less friendly to certain industries.
Respecting local attitudes regarding the environment can help an international expansion go more smoothly. Local regulations, for example, pertaining to filing documents, obtaining permits and registering businesses, can also be difficult to navigate.
The most effective and ultimately least costly way to cut through red tape is with the help of a local business lawyer or accountant. Financial Risk At one time, the U.
In recent years, the dollar has lost some of its ground to other currencies. If you own a U. Consider banking with an institution that has branches and a business presence both in the United States and in the country where your business will do business.
Inquire with the bank whether it is able to manage ForEx trading and conversions, and make sure you are confident in its knowledge of the local country. Present your concerns at the start to avoid future issues.
Political Risk Political risks for international businesses include nationalization and the seizure of assets, war and terrorism, and the failure of local authorities to enforce contracts in the region. Any of these issues can mean big problems and big expenses for your business.
Investigate the business dealings, approach, successes and failures of companies that have gone before you to find out what works and what doesn't in a given area and where you need to take extra precautions.
This World Bank agency has a team of experts who will create an insurance policy customized to your needs and requirements in hopes of promoting growth in politically turbulent areas.International businesses often do encounter political and country risks in markets in which they operate.
Investigate examples of political risk in international business and show how these risks can be managed. Financial institutions and business organizations operate its business activities abroad. The major types of financial risks are commercial risks, political risks, exchange rate risks, and other such as inflation-related risks.
Thus, political risks are non commercial risks. Political risks are any changes in the political environment that may adversely affect the value of a firm's business activities. Political Risks: It is the vulnerability of returns of a project to the political acts of a sovereign government.
Types of Risks Blockage of Funds: It refers to the fact that although a business entity may own the funds and still holds the property rights, it can not export its earning for investment purposes.5/5(3).
1Department of Marketing, College of Business Administration, Aftab Alam, Kamisan Gaadar. A case study “Challenges and threats for international business".
American Journal of Research Communication, , Vol 1 (4): } alphabetnyc.com The political risks of international trade include the. Political Risks in International Markets. The political risks in international markets are as follows; 1.
Direct interference in a foreign company’s business – expropriation, confiscation, nationalization Various countries around the world have different laws concerning marketing of products, especially food products, pharmaceuticals.
Political risk is the risk that a country will make political decisions that have adverse effects on corporate profits. Learn about micro and macro risk.