1 / 17

Chapter 1: Assessing the Environment: Political, Economic, Legal, Technological

Chapter 1: Assessing the Environment: Political, Economic, Legal, Technological. Instructor: Tran Nam Giang. Learning Objectives. Research the environment in which a company operates or will operate in order to assess: the political risks the economic risks the regulatory risks

shaun
Download Presentation

Chapter 1: Assessing the Environment: Political, Economic, Legal, Technological

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 1:Assessing the Environment:Political, Economic, Legal, Technological Instructor: Tran Nam Giang

  2. Learning Objectives • Research the environment in which a company operates or will operate in order to assess: • the political risks • the economic risks • the regulatory risks • technological risks

  3. Political Risk • Any governmental action or politically motivated event that could adversely affect the long-run profitability or value of a firm • Example: “… Bolivia nationalized its natural-gas industry, ordering foreign companies to give up control of fields and accept much tougher operating terms within six months or leave the country” Wall Street Journal 2006 • Why do governments do that?

  4. Common Political Risk Events • Expropriation of corporate assets • Forced sale of equity to host-country nationals • Legal discrimination • Barriers to repatriation of funds • Loss of technology or other IP • Interference in managerial decision making • Dishonesty by government officials regarding contracts

  5. Expropriation of corporate assets

  6. Forced sale of equity to host-country nationals

  7. Legal discrimination

  8. Barriers to repatriation of funds

  9. Loss of technology or other IP

  10. Interference in managerial decision making

  11. Dishonesty by government officials regarding contracts

  12. Political Risk Assessment • Helps companies manage exposure to risk and minimize financial loss • Two forms: • Consultation with experts • Development of internal staff capabilities

  13. Options for Managing Political Risk • Avoidance • Adaptation: equity sharing, localization, development assistance • Dependency: keep subsidiary & host nation dependent on parent firm • Hedging: insurance, local debt financing

  14. Economic Risk • Is closely related to political risk • Types of economic risks • Loss of profitability due to abrupt changes in monetary and fiscal policies • Loss of profitability due to changes in foreign investment policies. • E.g. barriers in profit repatriation, changes in interest rate, exchange rate

  15. Four Approaches to Assessing Economic Risk • Quantitative: assess economic variables (GDP, income, unemployment rate, inflation, budget, imports, exports, debts) • Qualitative: assess the competence of leaders • Checklist: easily measurable and timely criteria • A combination of these methods

  16. Regulatory Risks • Protectionist policies, such as tariffs or quotas • The attractiveness of the tax system • The level of government involvement in the economic and regulatory environment

  17. Technological Risks • The appropriability of technology: ability to profit from innovating technology maybe restricted • Inappropriate use of technology by others • Appropriateness of technology for the local environment

More Related