BUSA 356 Lecture Notes - Lecture 18: Nepotism, Retained Earnings, Internal Security Forces
6 Mar 2018
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Document Summary
Political risk: the possibility that political decisions or events in a particular country will cause foreign investors there either to lose money or fail to capture their expected returns. Is held distinct from the more straightforward concept of economic risk, political risk arises from the vagaries of governmental action. From the beginnings of trade political risk has existed, there was political conflict and outright violence. Some of the first firms to deal explicitly with the modern practice of political risk were the oil multinationals. Many of the oil sites existed in raw and highly volatile political environments. Oil companies often found themselves hostage to dramatic political shifts (revolution and a communist takeover of the oil fields of the caspian sea, expropriation in mexico, etc. Many countries began focusing on means of predicting political risk rather than just responding to it or enlisting the services of their home governments for countermeasures. Multinationals began sending executives on reconnaissance missions (grand tours).
