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INTERNATIONAL

BUSINESS RISK

Presented To: PresentedBy:Dr Rajeev Gupta Sir Sumeet Rawat

Arpita Nagar

Shreya Jhawar

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Introduction

According to theOxford EnglishDictionary risk refers toThe possibility ofsomething badhappening or expose to

danger or happening orloss

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Risk in International business

Risks in

International

Business

Commercial Risk

Financial

[Currency]

Risk

Country Risk

Cross

Cultural Risk

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Cross cultural Risk

Corporate Culture Differences.

Differences in National Cultures.

Cross-Cultural Competencies of Key Players.

Language difference impede effective

communication.

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Risk Factor1:Corporate Culture Differences

What is the degree of "fit" between theclient's corporate culture and the vendor's?

How close are their vision and values? Is one bureaucratic, the other

entrepreneurial? Human risk

Risk Factor 2: Differences in National Cultures

The globalization revolution is in its infancy,while national cultures are longstanding.

Cultural conditioning is deep. Despite surface similarities in the interconnected

world, the underlying attitudes, thought patterns,assumptions and expectations of differentcultures vary widely.

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Do people tend to be individually autonomousor group-oriented?

Egalitarian or hierarchical?

Risk Factor 3: Cross-Cultural Competenciesof Key Players

In addition to the technical, managerial,leadership and interpersonal skills requiredfor their jobs

The people need to have cross-cultural

competence if they are to be successful andnot put their company at risk.

This includes both knowledge about othercultures and the ability to adapt to cultural

differences.

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Financial Risk

Financial risk isnormally any riskassociated with anyform of financing. Riskis probabilityof unfavorable

condition in financialsector & probability ofactual return being

less than expected

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Currency risk

It arises from the change in the price of one

currency relative another (related to commodity

i.e. grain, metal) will change

Currencies appreciation or Depreciation. interest rate fluctuation, and other harmful

economic condition create uncertainty of returns.

When currencies fluctuate significantly, the value of the

firms assets, liabilities and operating incomes may besubstantially reduced

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Contd

Financial Risk include also:

Equity risk: or the risk that stock prices will changes.

Tax Risk: You must comply with the tax laws of the local

country.

Credit risk :is the risk of loss due to a debtor's on-

payment of a loan or other line of credit (either the

principal or interest (coupon) or both

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Contd..

Commercial risk is the risk of loss due to counterpartyor markets.

It is that risk in which a foreign debtor will beunable to pay its debts because of business events,such as : bankruptcy.

This risk mainly arises due to :-

1) Longer distances between you and yourcounterparty.

2) Different cultural, political and economicalenvironment .

3) Different national and international regulations.

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Contd

Strategic Risk:

Strategic risk is the business risk of :-

1) An immature strategy.

2) An inactive review process.3) A dis-empowered management

unable/ unwilling to take strategicdecisions.

This risk is an exposure to loss resultingfrom a strategy that turns out to be

defective or inappropriate.

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Contd

Operational Risk :-Operational risk is the risk of loss resulting from :-

1) Inadequate or failed internal processes.

2) People and systems

orfrom external events in a business.

Technological Risk

Exposure to loss arising from activities such as design andengineering, manufacturing, technological processes and testprocedures.

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Country risk

Country risk refers tothe risk of investing ina country, dependent

on changes in thebusiness environmentthat may adversely

affect operating profitsor the value of assetsin a specific country.

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Country Risk

Source of country risk

Political System

Government

Political parties Legislatives bodies

Lobbying groups

Trade unions

other political institution

Legal System

laws regulation, and rules

that aims to

Ensure orders in

commercial activities

Resolves disputes

Protect intellectual

property

Tax economic Output

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Country [Political Risk]

Political risk is generally viewed to be a biggerproblem in emerging markets.

The political actions and instability may make it

difficult for companies to operate efficiently in the

countries.

The culture or the instability of a country.

Exposure to potential loss or adverse effect on

company operation and profitability caused bydevelopment in a countrys political and legal

environment.

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