Hi Class, Please find my following post on DB - Political Hazards : We can also think about what insight the measures

of the political environment p rovide us when we think of managing a multinational company. Should a company always avoid politically risky countries? In today's globalized business environment multinationals have no other choice b ut to expand for new markets, opportunities and cheaper resources. But in many c ountries political risk is common risk factor for multinationals and in past man y of them suffered heavy losses due to change in government, government policies , laws of land, governance and political instability. Do you think the political environment and a company's exposure to political ris k or political hazards can be managed? If so, how? Political environment and risk associated with it continuously changes across in all countries across the globe these risks impact not only multinationals but a lso local organization. Political risk is categorized as external strategic risk s and organization need to evaluate it before, during and after deciding investm ent in particular country or state. Although it is impossible to completely mana ge and eliminate political risk associated with the country but organization can certainly manage them. For example oil exploring companies has faced political risk in Venezuela, Mexico, Iran, Iraq, Kuwait and other middle eastern countries but developed ways to understand, analyze and manage. How to manage political risk Identify and map the political risk - Identify political risk like restrictions of Transfer i. e. some government has put restrictions on transferring of assets , intellectual properties, financial or human capital. Functional risk Risk asso ciated with the operations and functioning of business and day to day activities , decision-making, local rules and laws related to labor, taxes, export import p olicies, environmental laws. Appoint ex bureaucrats and explain organization plans, benefits to the country, community and develop good communication with the local government. Teach or familiarize expatriates with local history, business environment, cultu re, language Right mix of expatriates and local employee for efficient business functioning Provide educational, recreational and other facilities to local stakeholders for creating positive feeling about the organization Strictly follow local laws and regulation, avoid unethical business practices Continuous touch with community and government agencies for updated information about change in rules or regulation related business, taxes etc. Joint venture with local companies and preference to use local resources Understand intellectual property rights and other property rights and actively u se them to protect intellectual assets and other assets Use local debt event though little bit costlier than compared to foreign debt an d local equity for local business Assess each country's performance based on economic & social performance, govern ment policies and goal, local culture, communities, customs and compare it with parent and other countries. For identifying economic and social performance mangers must identify following [1] GDP growth Inflation Currency movements Savings rates Unemployment Wage costs Distribution of income Educational achievements Life expectancy Migration

Nutrition standards Population growth Public health [1] For identifying Government and country goals the following government policies m ust be examined in detail:[1] Fiscal policy Foreign policy Foreign trade and investment policies Industrial policy Monetary policy Social policies Mechanisms for transition of power Key power blocs Extent of popular support for the government Degree of consensus in policy making The processes through which political differences are resolved[1] To identify judiciary and other important influencing factors organization shall understand [1] Independence of the judiciary and the executive Competence and honesty of bureaucrats and senior government officials Importance of informal power networks outside the government Structure, technology, management practices and financial strength of business i nstitutions Labour conditions, including pattern of unionisation and collective bargaining p ractices The rights and duties of the members of society Whether there is a broad consensus Serious ideological tensions[1] Regards, Mukesh Thoke References : 1. 2. .pdf www.vedpuriswar.org/books/ERM/06-Managing%20Political%20Risk.doc http://www.pwc.com/us/en/risk-compliance/assets/PwC_PoliticalRisk_052006