BBB4M

1. BBB4M CHAPTER 9

2. 9.1 • Canada’s government seeks to promote Canadian business in other countries and to lessen the risk for foreign companies. They • Establish import and export policies • Develop trade policies and regulations • Assist Canadian exporters succeed • Match potential Canadian exports with international clients • Maintain and improve relations with other nations • Assist Canadian companies adjust the changing international market • Foster innovation and human resource development

3. Political Risk • Types of Political Systems • Democratic Model – The general population has the right to vote in free elections. (market or capitalist economy) • Totalitarian Systems – they centralize power and often use military control. Citizens have little say (command economy) • Mixed system of government POLITICAL INTERDEPENDENCE

4. 9.2 • Types of political risk • Risk of general political instability • Ownership risk • Operations risk • Transfer risk

5. There are a number of questions a company should ask itself to predict the possibility of risk, provide for it, and still project a profit: • Is terrorism part of the political landscape? • Could extremist groups pose a danger to the general stability of society? • Has there been a withdrawal of freedoms? • What, if any is the military’s role in government? • Could religious or ethnic pressures lead to civil strife and endanger employees or property?

6. Evaluating Political Risk: • What are the chances of political and economic instability in the host country over the next five years? • What agreements are in place between the Canadian government and the host government regarding Canadian investments? • How committed is the current government to rules of ownership rights? • If a new government were to emerge, how would its platform and ideology change the current state of business affairs? • Would a new government be likely to propose changes in policies that would affect the country’s way of doing international business? • How would changes in government affect the profitability and safety of a n international project?

7. Consequences of Terrorism • Terrorism tends to occur when least expected and becomes a greater concern when open borders make it easier for terrorists to carry out their plans. A terrorist attack has many negative consequences on a countries economy and its businesses. It also affects transportation, security and travel • Evaluating legal concerns • Laws and regulations differ from one country to the next, when doing business in a foreign country, you must obey the laws from that country.

8. 9.3 • Economic Systems • An economic system is what allows a country to decide what to produce, how to produce, and for whom to produce. These systems include natural resources, labor, capital, management and standards for creating products. • Market economies • Centrally planned economies • Mixed economies

9. Global economic systems • Interdependence, clustering • Business cycles • Depression, Recovery, Prosperity and Recession • The world economic freedom index • Economic freedom rating • Canada’s global entrepreneurs • Around the clock world markets • Common currency

10. 9.4 • Strategies to manage financial risk • Foreign exchange management • Credit control • Open accounts • Insurance • Analyzing foreign investment climates • General political instability • Government policies towards foreign investment • Policies and legal factors • Economic environment • International payments