Typology of Political Risk
Essay by rishi_positive • October 29, 2012 • Essay • 200 Words (1 Pages) • 864 Views
Typology of Political Risk
Firm-specific risks - directed at a particular company are rare. Government will nullify its contract with a given firm or that a terrorist group will target the firm's physical operations are firm-specific. It is easier to reduce the likelihood and impact of firm-specific risks by incorporating strong arbitration language into a contract or by enhancing onsite security to protect against terrorist attacks.
Country-specific risks - not directed at the firm but are countrywide are more common. Examples include a government's decision to forbid currency transfers or the outbreak of civil war in the country. Firms usually have little control over the impact of country-level political risks aside from stop operating in the country of question.
Government risks - Arise from the actions of a governmental authority, where that authority is used legally or not. Examples include a legitimately enacted tax hike or an extortion ring that is allowed to operate and is led by a local police chief may both be considered government risks.
Instability risks - Arise from political power struggles. Conflicts could be between members of a government fighting over succession or mass riots in response to deteriorating social conditions.
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