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Government, Law, and Political Risk in International Business - Coggle…

- - - - It is risk that affects a very small number of assets.
        
        Example is news that affects a specific stock such as a sudden strike by employees
    - - A risk that influences a large number of assets.
        
        Example is political events
  - - - The risk that a country will not be able to honor its financial commitments.
        
        This type of risk is most often seen in emerging markets or countries that have a severe deficit.
    - - When investing in foreign countries, firms must consider the fact that currency exchange rates can change the price of the asset as well.
        
        As an example, if you are a resident of the United States and invest in some Japanese stock in Japanese yen, even if the share value appreciates, you may lose money if the Japanese yen depreciates in relation to the US dollar.
    - - A rise in interest rates during the term or debt securities hurts the performance of stocks and bonds.
    - - The financial risk that a country’s government will suddenly change its policies.
    - - Is when a company or individual will be unable to pay the contractual interest or principal on its debt obligations.
        
        This risk is of particular concern to investors who hold bonds within their portfolio.
    - - It is the day-to-day fluctuations in a stock’s price.
        
        Market risk applies mainly to stocks and options. As a whole, stocks tend to perform well during a bull market and poorly during a bear market volatility is not so much a cause but an effect of certain market forces.
- - - - Are the actions by groups of people or governments that have the potential to affect the immediate or long-term viability of a firm.
- - - - These laws determine the markets the firms serve, the cost of goods and/or services they offer, the price they charge, and costs for labor, raw materials, and technology.
        
        In most Western cultures the law functions within the framework of society whereas in theocratic cultures the law is a function of both societal and spiritual guidance.
        
        Hebrew and Islamic laws are the result of what God dictates, of what the scripture says, and of any prophetic practices.
  - - - Common law is based on tradition, precedent, and custom and usage. The courts fulfill an important role by interpreting the law according to these characteristics.
    - - A codified legal system, is based on a detailed set of laws organized into a legal code.
    - - This law is based on the officially established rules governing the faith and practice of a particular religion.
- - - - The international community is adamant that corruption must be stopped.
- - - - a driving force behind political instability around the world.
        
        Many uprisings and conflicts that are thought to be political are actually expressions of differences among ethnic groupings.
- - - - A tariff would increase the price of a foreign product or service relative to the domestic counterpart.
        
        So through the use of import taxes a country can partially restrict imports and provide protection for domestic industry. This presents a risk for the foreign MNC.