RMI 2302 Lecture 14: RMI Module 14 Notes

3 Pages
Unlock Document

Risk Management/Insurance, Real Estate and Legal Studies
RMI 2302
Dr.Charles Nyce

RMI Module 14 Notes - Overview o Economic analysis of potential international expansion (supply or demand side) does not take into account political risk o Understanding the political context is vital to success o Political risk- impact of politics on markets ▪ Passage of time ▪ Foibles of leaders ▪ Risk of popular movements ▪ All factors that may stabilize or destabilize a country o Time frame of political risk is important ▪ Hedge fund vs. chemical plant location o Political Risk Analysis ▪ More subjective than economic risk analysis ▪ Broad observable trends ▪ Nuances of society and quirks of personality - Political Risk Analysts o Internal ▪ Royal Dutch/Shell ▪ AIG o External ▪ Consultants ▪ AON - Why do we need political risk analysis? o 1. International markets more interconnected than ever before o 2. The US is making the world a more volatile place (Bush Era) o 3. Offshoring trend is growing o 4. Increasingly reliant on energy from political risk states- Saudi Arabia, Iran, Nigeria, Russia, Venezuela - Difference between Economic and Political Analysis o 1. Economic Analysis- “Can a particular country pay its debt?” o 2. Political Analysis- “Will a particular country pay its debt?” - Political Risk- Unit of Measure o Stability ▪ Two factors • Strengthen against shocks • Shocks themselves - Strength Against Shocks o Can political leaders implement policies in spite of shocks that occur o Can they avoid policies that actually create shocks? o Countries that can avoid creating shocks and ride out those that do occur are the most stable with regard to political risk - Shocks o Internal ▪ Demonstrations in Egypt = Arab Spring ▪ Transfer of power = Cuba, Elections, Obamacare o External ▪ Refugee influx ▪ Tsunami ▪ Terror campaign - Stability and response to shocks o Example: Election results that are challenged and ultimately decided by court ruling ▪ 2000: US ▪ 2003: Taiwan ▪ 2004: Ukraine ▪ Which two of these led to streets being closed off by protestors and threats of violence - Stability and Openness o US vs. Cuba ▪ Both considered “stable” ▪ One is open, one is closed ▪ Transition from on
More Less

Related notes for RMI 2302

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.