Risks Management on the Global Stage
by Meetu P. Digital marketerMany
organizations have been tempted in recent years by the promises of the
significant return on investment that comes with the successful expansion into
foreign markets. While these benefits are certainly hard to ignore, with such
expansions comes innumerable risks from any number of sources, not the least of
which is the shifting political climate currently playing out on the global
stage. Though several companies have indeed seen outstanding results from the
undertaking of such ventures, many have had to face a great deal of difficulty
and loss as a result of unstable political circumstances in their selected
markets.
Recent
studies conducted with the goal of gauging political risk factors and their
severity on a global scale, have shown that these threats have risen in nearly
twenty countries in the last year. While the three primary risks to corporate
governance were ruled to be issues of unexpected shifts in regulations, new
restrictions, and contract breaches, a great many other factors have been
pointed out as well including problems with weak governments, economic
uncertainty, and other politically oriented risks. Risks or no risks, companies
are not shying away from these challenges, with the result that projections
show foreign direct investment increasing by nearly 15% this year alone. The
most complicated problem to come out of this situation is the fact that many of
those countries that represent the greatest risk factors also represent those
which offer the greatest opportunities. While any number of socio-political
disturbances can bring about negative consequences for an organization, and
while foreseeing and making preparations to handle such unruly eventualities
can be quite a challenge, there are steps that can be taken to help mitigate
such risks.
Perhaps
the simplest and most obvious means a company has of helping to protect
themselves from these problems is through the purchase of political-risk
insurance. While the use of these measures has been fairly low in recent years,
this has begun to change, even as the options offered by these policies have
begun to expand, covering more and more risk factors to accommodate the current
political unrest affecting many countries. However, other companies have sought
to avoid financial solutions and minimize their risks by limiting their
presences in any region, only sending in the bare minimum resources with which
they can function. These strategies generally work through a shared-services technique
of restricting their presence by making use local resources as much as
possible, creating a centralized service method within that area.
Many
companies seek to reduce their chances of encountering these risks through
alternative strategies. These risk management strategies mainly involve
cooperating and allying themselves with local businesses, namely through joint
ventures, and with governments of the region in question as a means of
alleviating and avoiding any confrontation, as well as nurturing friendly
relationships that may prove useful should challenges arise. Another such
tactic which has proven itself effective is in the hiring of local workers who
can help provide the company with valuable insight into the political climate
in order to help monitor, predict, and plan against possible threats.
Alternatively, many companies seek to install themselves as a friendly presence
within a region by sending their employees to these areas with the goal of
becoming a part of the socio-political landscape and developing a human
connection with the local populace rather than standing out as foreign
corporate strangers.
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Created on Sep 30th 2021 07:10. Viewed 158 times.