country risk and political risk.pptx-by kalyani dutta
TRANSCRIPT
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7/29/2019 COUNTRY RISK AND POLITICAL RISK.pptx-BY KALYANI DUTTA
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Business environment is affected byvarious internal and external factors.
These factors are not static , rather theseare constantly changing.
The changing factors carry with them
both opportunities and risks oruncertainties which can make future ofbusiness.
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According to keith Davis- Business risk isa concept used by auditors and
managers to express concern aboutprobable material effects of anuncertain environment on achievingestablished objective
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According to Arthur M.Weimer Businessrisk can be defined as any unfavorablechanges in external or internalcomponent of business environmentwhich may pose threat in achievingbusiness objectives
According to Bayard O.WheelerBusiness risk refers to uncertainty withthe expected outcomes for a BusinessVenture.
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Internal Risk
Operating Risk/Micro Level Risk
1. Disruption in supply of funds2. Increase in competition
3. Change in taste ,Preference of
Consumers4. Problem with Market Intermediaries
5. Public Resentment
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General Environment Risk/Macro LevelRisk
1. Economic Risk2. Political Risk
3. Technological Risk
4. Natural Risk5. Global Risk
6. Social and Cultural Risk
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Internal Risk-Internal Risk arises fromunexpected events with in business
enterprise. Types
Occurrence of strike
Lockout Financial crunch
Loss due to damage of property
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Loss by fire , theft, accident , suddenfailure of machinery and equipment
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Identify the risk
Identify the possible effects of various
risks. Understanding how to Respond
Monitoring the effectiveness of Risk
Management Process.
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Risk are the events or conditions that
may occur & whose occurrence ,if itdoes take place , has a harmful ornegative impact.
Risk is manifested in the probability ofloss or damage to a business firm
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LEGAL RISK : Changes in Law
REGULATORY RISK : Regulatory design &changes
POLITICAL RISK : Resulting from politicalchanges
SOCIAL RISK : From Social Attitudes NATURAL RISK : Natural Disasters ECONOMIC RISK : Economic Changes
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Country risk analysis is basicallyconcerned with the performance of aneconomy and the behavior of the
Government and the institutions whichdetermine the Business Environment
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Collection of risks associated withinvesting in a foreign country is called as
country risk. these risk include politicalrisk, exchange rate risk, economic risk.
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It is practiced by govt officials as a wayto interpret or anticipate the behavior of
other govts. Senior managers of MNCs before taking
decisions.
Promote investment & jobs in differentsectors.
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Mass riots and civil wars , widespreadterrorism in the nation.
Political instability Widespread corruption
Changes in economic policies
Bad industrial relation Increase in taxation rates
Rigid labor laws and poor work culture
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Rigid labour laws and poor work culture.
Huge deficit in government budget.
Rigid currency control. Weak financial market institutions
Slow judicial machinery
Poor relations with neighboring nations
Weak infrastructure like shortage ofmanpower, lack of efficient transportsystem.
Bad weather conditions
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Monetary Policy-is the process by which
the govt, central bank, or monetaryauthority of a country controls the supply
of money, aviability achieve of money &
rate of interest to certain objectives.
Fiscal Policy
Import controls
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Political environment is set by thePOLITICAL SYSTEM, THE CONSTITUTIONALFRAMEWORK, EXTERNAL POLITICALRELATIONS, FUNCTIONING OF THE
GOVERNMENT, ROLE AND BEHAVIOR OFVARIOUS POLITICAL PRESSURE GROUPS
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1. GENERAL INSTABILITY RISK
Due to change in the political systemwith a change in Govt.
Due to social revolution, normalelection process etc
Due to poor Governance, poverty andexploitation
Cntnd
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2. OPERATIONAL RISK
Restriction on the production, marketing,finance, human resource management orinternational business
3. OWNERSHIP RISK
It arises from the probability that the govt.might take actions that may lead to erosion inownership or control in the business firm.
Cntnd
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2. OPERATIONAL RISK
Restriction on the production, marketing,finance, human resource management orinternational business
3. OWNERSHIP RISK
It arises from the probability that the govt.might take actions that may lead to erosion inownership or control in the business firm.
Cntnd
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1. RISK AVOIDING STRATEGIES
Avoiding politically sensitive productsAvoiding sensitive regionsContractual agreements
Tie-up with other Firms2. RISK SHIFTING STRATEGIESRisk can be shifted to other partiesthrough Insurance
Cntnd
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3. RISK REDUCTION STRATEGIES
Establishing a risk-assessment system
Developing the local economy
Local Equity participationGood Corporate Citizenship
Maintaining Good Political Relations
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Identify the risk
Identify the possible effects of various
risks. Understanding how to Respond
Monitoring the effectiveness of Risk
Management Process.
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Improving decision making and makingappropriate plans policies and
strategies. Minimizing the amount of loss.
Preventing serious disasters.
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Substituting the risky project
Scientific forecasting
Technological research Credit screening
Inventory control
Effective packing Safe work environment
Security arrangements
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Fire control equipment
Coordial relations
Social responsibility measures insurance