Global Business and Politics: Risk Management
When it comes to managing international risk, there are three main areas that must be addressed: political risk, economic risk and social risk—i.e., the limits to expansion. This presentation will address each of these three risks and show how expansion of the scope of the organization should proceed.
As DiDraga (2013) notes, the scope of risk management is based on three points: 1) analysis—i.e., posing the question of what happens if…, 2) response—i.e., formulating an answer to the question posed in point 1; and 3) control—i.e., monitoring the situation and making adjustments when necessary (DiDgraga, 2013). These three points should be considered whenever risk is to be managed.
Political risks can be seen everywhere today. The recent case of “Brexit,” with the UK voting to leave the EU, has created an international environment in which nationalism and new trade deals are a constant issue. In America, the concept of an “America First” policy has been put forward by the Trump Administration—and it has, in turn, put pressure on other countries, from Canada to China, in terms of a how free and fair trade will be pursued. In other parts of the world, political instability can lead to market crises, currency crashes, and production halts. Case in point is Greece, which has attempted to show foreign investors that the country is open for business and would like to see more...
Other countries have taken note and investment in Greece continues to be sluggish. Managing political risk, therefore, depends upon assessing the political situation of the target country and determining whether the stability there is authentic, whether the political leaders are likely to form good partnerships with businesses seeking to invest in the country, and whether there is likely to be any profit for both sides as a result of the investment. A country like China, which has recently had President Xi Jinping’s name written into its Constitution, shows tremendous stability, politically speaking, and its leaders have demonstrated a great interest in forming strong business relationships with entities looking to work with China to build a multipolar world (Amin, 2017). In order to manage political risk, it is important to understand what the political leaders of a host country want and to gauge whether or not the business can work within the established parameters to effect a win-win situation for both the organization and the host country.
Economic risks are another story. They very often follow from and/or are connected to political risk—as politics and economics are typically intimately connected—and…
