Assessing Political Risk
Assessing Political Risk
April 25, 2011
Assessing Political Risk
Dorchester, Inc. is a U.S. based conglomerate that would like to break into the international consumer electronic business. Eun and Resnick stated that “the scope of business activities has become highly international.” (p. 151) There are several factors that could have a crucial impact on any international business; however, the one that will be addressed in this paper is the political risk of investing internationally. Eun and Resnick stated that “in assessing investment opportunities in a foreign country, it is important for a parent firm to take into consideration the risk arising from the fact that investments are located in a foreign country.” (p. 405)
Wagner stated that “the exercise of political power is the root cause of political risks in international business.” (p. 1) Every country has some type of political risk of doing business in that country; however, every country may not be impacted the same way. The impact of political risk is country specific. Eun and Resnick stated that “political risk that firms face can differ in terms of the incidence as well as the manner in which political events affect them.” (p. 405) Political risk can range from tax increases to briberies and extortions. The key factor for businesses is to have a clear understanding of the political risk of that country and the consequences that could potentially impact its business. The purpose of this paper is to assess the political risk that is associated with doing business in the three foreign countries known as Korea, China, and Japan.
Korea Political Risk
South Korea is a fast growing country that ranked third out of 33 member countries of the Organization for Economic. That analysis was based on the macro risk of a country. Eun and Resnick defined micro risk “where all foreign operations are affected by adverse political developments in the host country.” All countries have some type of
April 25, 2011
Assessing Political Risk
Dorchester, Inc. is a U.S. based conglomerate that would like to break into the international consumer electronic business. Eun and Resnick stated that “the scope of business activities has become highly international.” (p. 151) There are several factors that could have a crucial impact on any international business; however, the one that will be addressed in this paper is the political risk of investing internationally. Eun and Resnick stated that “in assessing investment opportunities in a foreign country, it is important for a parent firm to take into consideration the risk arising from the fact that investments are located in a foreign country.” (p. 405)
Wagner stated that “the exercise of political power is the root cause of political risks in international business.” (p. 1) Every country has some type of political risk of doing business in that country; however, every country may not be impacted the same way. The impact of political risk is country specific. Eun and Resnick stated that “political risk that firms face can differ in terms of the incidence as well as the manner in which political events affect them.” (p. 405) Political risk can range from tax increases to briberies and extortions. The key factor for businesses is to have a clear understanding of the political risk of that country and the consequences that could potentially impact its business. The purpose of this paper is to assess the political risk that is associated with doing business in the three foreign countries known as Korea, China, and Japan.
Korea Political Risk
South Korea is a fast growing country that ranked third out of 33 member countries of the Organization for Economic. That analysis was based on the macro risk of a country. Eun and Resnick defined micro risk “where all foreign operations are affected by adverse political developments in the host country.” All countries have some type of
References: Eun, Cheol, S., Resnick, Bruce, G. (2009). International financial management Retrieved from http://www3.ambest.com/ratings/cr/reports/SouthKorea.pdf April 24, 2011 Herskovits, Jon., Marshall, Andrew http://www.reuters.com/article/2009/11/03/korea-risks-idUSSP48426420091103 retrieved o April 24, 2011 Retrieved from http://www3.ambest.com/ratings/cr/reports/SouthKorea.pdf April 24, 2011 Wagner Daniel http://www.irmi.com/expert/articles/2000/wagner10.aspx retrieved on April 24, 2011