Political Risk Essay

Political Risk is what happens when a attach to or companies establishment a serial publication of political changes that could venture its spatial relation in a plain. Political Threat is a speckle when a connection would eventually suffer a series of grownup conditions on a certain merchandise. Political Changes are a series of changes within the government of a earth. Micro Risk a grammatical case of political fortune that threatens the activities of a certain industry. Macro Risk a type of political endangerment that threatens all the industries. Violent Situations Situations that risk the honor of the people, the infrastructure, the economy among others in the country. National Requirements when a country forces a company to modify its circumstances to stay in the market. Introduction We studied the twine of political risk in seam all around the land analyzing its definition through it.It is central to take into account that in transaction it is crucial to kn ow about the political feature of a country because political risk is not always presented in the same way, it depends on the characteristics of the countries involved in the problem. We had a previous knowledge given by the teacher and we alike had in changeion obtained from the news we are constantly reading, only we did not have numerous examples of that because all the cases that could be examples of political risk took place in Latin America all of them were extremely reas sensationd and onsonant with the definition we had of political risk, however we concluded that it could be less excite for our classmates because those cases are actually(prenominal) well-known. That is the main reason we had to search cases that were not sever of the public domain in the Colombian context and we decided to charge on cases from different parts of the world and in that dedicate of ideas we could meet how companies face political risk. This study give table service us to cleanse our knowledge in business and governing. ArgumentsFirst of all is very important to understand the definition of political risk. It is what happens when a company or companies face a series of political changes that could threaten its situation in a country. Any company could be come uponed by political changes, as well as any country could be change by political risk situations derivative of political changes. The ingredients that lead to political risk are revolutions, wars, general resources, political reforms, among others. There are two types of risks that could affect a company, a market or an industry.Macro risk and small risk the foremost is the one that affects all company in all(prenominal) industry, and the second is the one that affects a specific industry and its companies. Another factor that threatens the development of an industry within a country is violence it could be classified in three different kinds terrorism, open-war and kidnapping. The national re quirements are also a reason for political risk this is when a country has a very high and strong protectionism or when the government forces companies to have a determined number of local products.When companies are victims of political risk in that respect are some ways to fight it. If the company has security problems, the declaration would be to contract a security agency and also an damages agency if the problem is because of the local or national requirements, the company should enamour a partner from that region or country and the last one would be to create political pressure to fight the political problems. The head start study case we found is about a Ukrainian company that was affected by political risk in Russia. Ukrainian cast-iron and steel company Azovstal made its de simply in the world(prenominal) deposit markets this week, fortunately selling $175m of bonds in loan participation note format yesterday (Thursday) through joint leads ING and Russias Moscow Nar odny But piece the company wanted to raise up to $200m in five course of instruction funds, Ukraines political volatility and the threat of further disputes with Russia over muck up put paid to those ambitions as investors shied away from buying that typo and space of risk without a concession. (Ukraines Azovstal overcomes politics to sell $175m. (2006). Euroweek, 1-1. Retrieved from http//search. proquest. com/docview/231056813? accountid=45662) This Company was the trio largest steel producer in Ukraine by the year 2006, it had plans for expansion into the international market beginning with Russia. When Azovstal finally entered into the Russian market it had to face many problems from Moscow and Kiev. Both nations reached one of its bastinado moments in their relations during that time.Viktor Pynzenyk, hence the finance minister resigned as a protest over the closing of Kiev to pay $95 per 1000 cubic meters of gas to Russia when they utilise to pay $50. That decision was made very close to the parliamentary election of that month and it was very bad for the then president of Ukraine Viktor Yushchenco. This crisis, at its worst moment, generated the worst threat from the Russian government to not sell to a greater extent than gas to Ukraine. Here we can see the Macro risk situation that Azovstal went through because the lack of gas supply could totally affect every Ukrainian company.Azovstal, which had already planned to convert its machinery to use coal, decided to foreknow it to prevent itself of shortage after many weeks both governments reached an agreement, even so, Azovstal had to invite many reforms, it had to modify its internationalization plans that were based on the entrance into the Slavic countries because of the frequent diplomatic conflicts that it had with Belarus finally they decided to enter into the Middle einsteinium market.The second study case we found was about a Chinese company when it tried to enter into the Vietnamese market it had to face a worths war, very high tariffs and the lack of help from the government and people. The Lifan Group would curiously welcome new opportunities. Competition in motorcycles has become intense, and profit margins are falling. The group has a big share of the export market to Vietnam, but there too it faces rapidly growing competition and vicious price wars. (Business The communist entrepreneur face value. (2003, Mar 29). The Economist, 366(8317), 74-62. Retrieved from http//search. proquest. com/docview/224030774? accountid=45662). Lifan Group entered into the Vietnamese market in the late 90s but it had to face very bad conditions because it was a foreign company, besides this, Hanoi implemented very strong protectionist politics to prevent the national industry to be affected by foreign companies this is a Macro risk situation against Vietnamese politics.Another fact that did not help too much was that Lifan was a Chinese company and the relations between Beij ing and Hanoi were not the best. To face this situation Lifan company countered by two fronts in first instance it allied with a Vietnamese company for assembling cars in Vietnam, they do that in a direct way in order to improve their situation and they obtained good results because it reduced the high tariffs and the negative regulate from the ones who dont trust in China.If the cars were assembled in Vietnam it would help more to Hanoi than if they imported them. The second fact that helped Lifan Group to face this situation of political risk was the gain of political influence in the sea captain China when the directives of Lifan reached positions in the Chinese communist party, they ensure the Chinese help in case of any misfortune. Conclusion As future business people we know the importance to keep in touch with the fooling information of the world.Political Risk rates in a country are an essential part of a business, by them we could know if it is workable to invest in a co untry or in a company in a determined country, also if the debut of a company in another country will be successful or not and if the people in that foreign country will accept the company and its products or services based on their politics or government.