Introduction to Political and Economic Risk

Unit 1.1- Introduction to Political and Economic Risk
International business requires a series of screenings of the four major areas of business: finance, marketing, personnel and production. The initial screening is to evaluate the basic need or potential for foreign trade and investment. The marketing department of a company is responsible for this evaluation domestically. The factors used in this evaluation process may have to be modified for the foreign market but are usually successful when such is done. The studies done for domestic markets do not apply in the foreign markets because of the different socio-cultural and socio-economic forces that come into play. Economic and financial sources are evaluated by the finance area of a company. This area does the planning and forecasting to evaluate costs and output which can be easily adapted to the foreign markets by adding in the additional costs associated with international trade. Investigations of political and legal forces are often outsourced by companies and are adequately covered by doing so. Several screenings that are often overlooked which can negatively impact a company if not properly evaluated are socio-cultural forces and competitive forces. Another factor is not knowing the foreign environment. This assessment usually requires a personal visit.

Unit Outline

 * Introduction
 * Cultural Issues
 * Corporate Risks
 * Country-Related Risks
 * Economic Risks
 * Cultural Risks
 * Summary
 * Resources
 * Activities
 * Assessment

Resources


Correlation: Materials from this unit correlate with NASBITE CGCP's Knowledge Statement 04/01/01: Knowledge of political and economic risks causing late and/or non-payment from overseas markets (e.g., cancellation/failure to grant U.S. export license, civil unrest, foreign currency delays/shortage)