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Chapter 6: Government, Law, and Political Risk in International Business -…
Chapter 6: Government, Law, and Political Risk in International Business
External Economic Relations Risk
Trade restrictions
Tariffs
Quotas
Embargoes
Economic instability
Inflation
Recession
Depression
Currency fluctuations
Legal Risk
Contract law
Different types of contracts
Enforcement of contracts
Intellectual property law
Patents
Trademarks
Copyrights
Labor law
Minimum wage
Working conditions
Discrimination
Political Risk
Political instability
Coups
Revolutions
Wars
Government corruption
Changes in government policy
Resolving International Disputes
Source of Jurisdiction
Nationality of the parties involved
Location of the events that gave rise to the dispute
Terms of any contracts or other agreements between the parties
Public policy interests of the countries involved
Convenience of the parties and witnesses
The Political Environment
Relations between the countries involved
Attitudes towards foreign investment and trade
Level of corruption
The Legal Environment
Common Law
Based on precedent
More flexible
Less predictable
Civil Law
Based on a written code of laws
More predictable
Less flexible
Theocratic Law
Based on religious law
Least flexible
Most predictable
Government Issues and Corruption
Corruption
Abuse of public or private office for personal gain
Can take many forms, such as bribery, extortion, and embezzlement
Can have negative consequences for businesses, such as increased costs, unfair competition, and damage to reputation
Government Issues
Government policies and regulations can have a significant impact on businesses
Businesses need to be aware of the government environment in the countries in which they operate
Bribery
Offering or receiving a bribe to influence the behavior of a public official
Illegal in most countries
Can have serious consequences for businesses, including criminal sanctions
Mitigating Corruption Risks
Businesses can take a number of steps to mitigate the risks of corruption, such as:
Having a strong anti-corruption policy in place
Conducting due diligence on potential business partners
Training employees on anti-corruption laws and regulations
Reporting any instances of corruption to the appropriate authorities