Preview

How Does Multi National Corporations Minimize Investment And Political Risk

Good Essays
Open Document
Open Document
1047 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
How Does Multi National Corporations Minimize Investment And Political Risk
Answer ONE of the following questions: Discuss how multi-national corporations can minimize investment and political risks through their choice of market entry strategy
Intro :
Gt về globalization and reasons companies go approach. Obviously, with the impact of globalization trading and traveling around the world are become easier, comfortable and easily accessible. As the result, in all countries around the world, the economic conditions have been developed and these significant improvements make several companies become wealthier in both advanced and developing countries. As we know, the multi-nation corporation’s purpose is to maximize their profit by making use of all these resources to invest not only in their country's
…show more content…
Political risk insurance protects against the hazard that a government will take some action that causes the insured to experience a large financial loss. Even though at a macro level, political risk and catastrophes are very difficult to manage, however, at the company level, political risk can be could be handled. This comes at quite a cost, but best used as an absolute fail-safe solution, especially in combination with other, more practical political risk management strategies. An example about political risk insurant could be an automobile manufacturer. This company set up a plant in a developing country and it suffers a risk of losing its plant following a coup in the country. If after the coup, the national government declares its ownership of all formerly private factories, political risk insurance could compensate the auto manufacturer for the loss of its …show more content…
However, all the institutions mentioned above provide insurance for different types of political risks not all types of political risks. These agencies provide insurance cover to a limited extent of investment [such limit of insurance liability varies with each agency]. Therefore, PRI does not completely insulate investors from losses owing to political risks. They have different principle and their insurance coverage may be applicable only w.r.t. specific industry and specific geographical location.one notifiable issue is that buying political risk insurance does not guarantee that a company will receive compensation immediately after an adverse

You May Also Find These Documents Helpful

  • Good Essays

    SA IBL TB8e Ch18

    • 3705 Words
    • 22 Pages

    Insurance is available from the U.S. government to U.S. firms against the expropriation of their property by a foreign government.…

    • 3705 Words
    • 22 Pages
    Good Essays
  • Powerful Essays

    The author of this paper’s intention is to present and examine a multi-national corporation. Dissect the how’s and what’s about it, and simply discuss its processes. The author will be giving a brief background on the company to easily elaborate how it is that the company is successful compared to its past. Its products and services will be conversed and the company’s industry will be discussed as well as its competitors and its market. Basically everything that has to do with the company will be discussed. Everything will be brought forth for the purpose of finding out what the company’s strategic management process is. In conclusion giving it a feasible action that can be applied to better the company overall.…

    • 2178 Words
    • 9 Pages
    Powerful Essays
  • Powerful Essays

    Midterm Study Guide

    • 3957 Words
    • 16 Pages

    * multinational company - more than 2 countries. the market-based, cost-based, and strategic motives a firm has to expand internationally. After this, we studied how global companies exploit economies of scale, economies of scope, and national differences to achieve their three generic objectives: (1) efficiency in current operations, (2) managing risks, and (3) innovation, learning, and adaptation. We concluded by introducing the nature and complexity of the international environment of international companies. (University 20)…

    • 3957 Words
    • 16 Pages
    Powerful Essays
  • Good Essays

    Financial Strategy

    • 8256 Words
    • 34 Pages

    Multinational corporation’s main goals are to improve revenue and profits by keeping the costs down, and to maximize profits for its shareholders.…

    • 8256 Words
    • 34 Pages
    Good Essays
  • Best Essays

    The objective of this document is to explain, based on the documentation that is found not only in the supporting text for this curriculum but, also the Political Risk Insurance Center web-site; The Ten Critical Steps for Risk Managers. The ten critical steps as compiled, explained and assessed from our documentation expresses a guide for export professionals in purchasing political risk insurance. The subject of this document with the focus on the ten critical steps, will be the country known as the Philippines, a Republic that was formed on July 4, 1946.…

    • 1399 Words
    • 6 Pages
    Best Essays
  • Satisfactory Essays

    Case Study Munich Re

    • 577 Words
    • 2 Pages

    Essentially, one can define a political risk as any factor that poses a threat of losing money that is caused by changes in a country’s government or regulatory environment. Declaration of war or terrorism (or both!) are considered in this particular risk category, and are the most extreme examples of such. Terrorism wants to strike where it can hurt the most and is an entity with the patience to wait it out to do so. The terrorist attacks of September 11th was an attack on a world superpower. The attacks had many political and economic implications, as it halted US airspace, disrupted worldwide finance, as well as throw many in-area businesses into complete disarray. “These actions are representative of corporate terrorism with the greatest of scopes.” According to the text, companies can prepare for the potential risk associated with terrorism. Some of the options to reduce risk include employee training in terrorism avoidance, purchasing of terrorism insurance, as well as securing buildings and the associated grounds.…

    • 577 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Uncertainty of an MNCs Cost of Capital Organization of the Text Chapter Theme This chapter introduces the multinational corporation as having similar goals to the purely domestic corporation, but a wider variety of opportunities. With additional opportunities come potential increased returns and other forms of risk to consider. The potential benefits and risks are introduced. Topics to Stimulate Class Discussion 1.…

    • 7688 Words
    • 19 Pages
    Good Essays
  • Good Essays

    Sample Answers Case Study

    • 436 Words
    • 2 Pages

    Political Risk is defined as;” the exposure to potential loss or adverse effects on company operations or profit caused by political/legal developments in that country”…

    • 436 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    The second group that present was Esprit de Corps and the two presenters were Gan Siew Huay and Kwan Pei Hwa. They begin their presentation with the history and definition of Multinational Corporation. They continue their presentation with the size and prevalence of Multinational Corporation, multinational index, top 6 destination for FDI, the world’s top 10 non- financial TNCs, the top 10 non- financial TNCs from developing countries, factors influencing location of companies, challenges to Multinational Corporation, OLI framework, and motives for companies to operate as Multinational Corporation. They conclude their presentation with…

    • 679 Words
    • 3 Pages
    Powerful Essays
  • Good Essays

    Decades of tariff regulated market and rule-based underwriting has deprived Indian General Insurance Industry of an opportunity to develop sound Underwriting Practices and Professional Risk Management Policies. Detariffing, which is a reality, coupled with high competition, makes it inevitable for the Industry, especially the public sector segment of it, to undergo a fast course of firmly embracing risk-based Underwriting, founded on a robust Risk Management Policy. Perhaps the magnitude of 9/11 terrorism losses and the underlying monstrous dimensions of such risks and the huge liability losses and natural calamity–caused catastrophic losses which shook even the Loyyds recently, could not be even remotely predicted by the best of Risk Experts and Underwriters across the World. Nevertheless, there is still a huge segment of total risk environment that is largely amenable to the discipline of Risk Management and sound, profitable underwriting. Indian General Insurance Industry has to hold the hands of the hesitant culture of professional underwriting and scientific Risk Management practices and formally usher them in to the arena of the Insurance Game.…

    • 3326 Words
    • 14 Pages
    Good Essays
  • Powerful Essays

    The global insurance industry seems to have escaped the worst of the financial crisis in comparison to other financial institutions. Day to day business has been relatively unaffected but the area that gave the most cause for concern has arisen from exposures to risky financial instruments. “The Reactions Magazine’s Global Insurance Conference 2009” was held in Swissotel, Zurich, Switzerland. At this conference the financial services industry tried to re set itself following the worst crisis for years. (www.euromoneyseminars.com). Insurance is an established industry. Like other companies insurance is facing increased competition from global players. It has been difficult for insurers to accomplish profitable growth, so they need to improve this. They will need to adopt new advanced approaches to expand their distribution networks. This essay is divided into two sections. The first talks about the types of risks that are present in the global insurance industry. I will take each of these points and discuss them in detail: growth, governance and risk management, market reporting, mergers and acquisitions, human capital and lastly compliance and regulation. The second section looks at the opportunities that are available to the global insurance industry within the next twelve to twenty - four months. They include: disaster modelling, disaster planning, managing the industry’s reputation, grow globally, innovative products and delivery and Focus on readdressing product and distribution strategies. The insurance industry is always looking for new opportunities in different services and geographies. To take advantage of these opportunities insurance companies need to re-examine their strategies and be prepared to drive basic changes in the way they work.“ The primary function of insurance is to act as a risk transfer mechanism. The basic principle of insurance is that the losses of the few are paid by the many. Its underlying purpose is to provide…

    • 3089 Words
    • 13 Pages
    Powerful Essays
  • Best Essays

    * Holzheu, T. and Lechner, R. 2005. ‘The Global Reinsurance Market’, Handbook of International Business: Huebner International Series on Risk, Insurance, and Economic Security, p 877-902..…

    • 3279 Words
    • 14 Pages
    Best Essays
  • Satisfactory Essays

    Insurance policies may be high than other companies because of company should be insured many international standers and government regulations and according to the policies of laws .…

    • 1125 Words
    • 5 Pages
    Satisfactory Essays
  • Good Essays

    Political Unrest

    • 774 Words
    • 4 Pages

    Political risk insurance (PRI) is business insurance that reimburses losses caused by social or political disruption in a country. It is also a product that can serve as a loss control or mitigation tool in order to encourage investment in a project. As such a tool, even small companies may be required to insure overseas investment with some form of PRI.…

    • 774 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Insure

    • 843 Words
    • 4 Pages

    “This nation was built by men who took risks - pioneers who were not afraid of the wilderness, businessmen who were not afraid of failure, thinkers who were not afraid of progress, dreamers who were not afraid of action.” Leaders have the inherent risk taking abilities… to take risk makes you a King but to cover the risk of kings makes you The King of Kings …. The ultimate test of your ability…Remember… “It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult” ... ready to dare…??? GIC Re gives you a chance to go in to the world of reinsurance …to find what drives this and come up with a strategy to retain the throne…. EMERGING RISKS In current volatile world, there are various new kinds of emerging risk. The few can be highlighted as follows:       Climate Change Global Life & Health Scenario Regulatory Risks Natural Catastrophes Liability Risks in Emerging markets Global Political instability & Terrorism Risks…

    • 843 Words
    • 4 Pages
    Good Essays