Country Risk: Understanding Political and Financial Risks for Multinational Corporations, Quizzes of International Business

Download Country Risk: Understanding Political and Financial Risks for Multinational Corporations and more Quizzes International Business in PDF only on Docsity! TERM 1 Country Risk (Political Risks) DEFINITION 1 Attitude of consumers in the host country - a tendency of residents to purchase only locally produced goods.Actions of the host government - pollution control standards, extra corporate taxes, withholding taxes & fund transfer restrictions.Blockage of fund transfers - could force subsidiaries to undertake projects that are not optimal (to make use of the funds).Currency inconvertibilityWarInefficient bureaucracyCorruptionfirm level or with firm gov't interactions TERM 2 Country Risk Characteristics (Financial Risks) DEFINITION 2 Interest rates: higher interest rates tend to slow growth and reduce demand for MNC productsExchange rates: strong currency may reduce demand for the countrys exports, increase volume of imports, and reduce production and national income.Inflation: inflation can affect consumers purchasing power and their demand for MNC goods. TERM 3 Measuring Country Risk DEFINITION 3 Macro-assessment of country risk represents an overall risk assessment of a country and considers all variables that affect country risk except those that are firm-specific.Micro- assessment of country risk involves assessment of a country as it relates to the MNCs type of business. TERM 4 Techniques for assessing Country Risk DEFINITION 4 Checklist approach: ratings assigned to various factorsDelphi technique: collection of independent opinions without group discussionQuantitative analysis: use of models such as regression analysisInspection visits: Meetings with government officials, business executives, and consumers to clarify risk.Combination of techniques: many MNCs have no formal method but use a combination of methods. TERM 5 County risk rating DEFINITION 5 Political factors assigned values political factors assigned weights summed to find political risk rating Repeat for financial risk rating Overall risk of project derived from political & financial