Free Online Course in International Business

Knowledge Statement

Knowledge of Commercial, Economic, and Political Risks of Buyer and Buyer’s country.

Activities

Activity 1

As the international manager, you have been asked by your new boss to meet and to explain international risk issues. You will need to identify the key points as well as the differences in assessing risk in the US vs. factors that apply internationally.  Prepare a one- page outline that you will use to discuss commercial, economic and political risks.

Activity 2

Select a country(ies) and identify economic and political issues that may affect a company’s risk both positively or negatively. Identify the sources of information and the type of information found at each source.

Assessment

1.                     Which of the following approaches to assessing country risk is most likely to reduce overall company risk? 

a.      Using a systematic approach to assure a consistent, relevant, and objective assessment

b.      Relying on briefings about anticipated “global trends” from experts in international affairs

c.       Talking to someone in the company who has some knowledge of the country from a prior visit

d.      Rating each country according to a pre-established criteria set to assure fairness

2.                     Political risk is best defined as the inability of a foreign customer to pay its debts in full and on time as a result of

a.      a change in the currency exchange rates.

b.      actions of their government.

c.       a failure of the banking system.

d.      lack of funds in the customer’s account.

3.                     After the recent election in your buyer’s country the currency was drastically devalued, which will make it difficult for your buyer to pay you on time. This would be considered

a.      commercial risk.

b.      country risk.

c.       economic risk.

d.      political risk.

4.                     Your new international customer has been in business for less than one year and is owned by an individual with little industry experience. When evaluating your risk, this customer shows significant

a.      country risk.

b.      commercial risk.

c.       economic risk.

d.      political risk.

(Correct answers: 1=a, 2=b, 3=c, 4=b.)