country risk and political risk.pptx-by kalyani dutta

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

country risk and political risk.pptx-by kalyani dutta

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