Risk of Business

Business at national as well as international level is all about taking risks, nothing is certain and an entrepreneur has to take chances or risks to earn profit. These risks can at times give fruitful result and at times may lead to losses.

Given below are some of the major risks faced in international business −

Strategic Risk

An organization should always be prepared, acknowledge the competition and be ready to face it on the international market. Many companies or competitors would prove to be good to be the replacement for products or services of an unrecognized company. An excellent, creative and innovative strategy will help and make a company successful.

Operational Risk

A company should acknowledge the production costs and make sure there is no waste of time and money. If the expenditures and costs are monitored properly, it will create and maintain efficient production and also help for internationalization.

Political Risk

How a government monitors a nation deeply affects the operations of a company. The nation might have a corrupted, hostile, totalitarian government but this is a negative picture of government around the globe. A company’s reputation and status can change if it functions in a nation monitored by that type of government. An unstable political situation proves to be risky for multinational firms. Any unexpected event like elections or any other political event can change the complete situation of a nation and put a company at risk.

Technological Risk

Technological development brings in many benefits, along with some disadvantages. Like lack of security measures in electronic transactions, higher cost of developing new technology, and the fact that these new technology may fail. When all of these paired with an old fashioned outdated existing technology, the result invites new dangerous effect in doing business at the international level.

Environmental Risk

Companies that set up supplementary or factory outside the residential country are expected to be conscious regarding the externalities they will produce. Negative externalities include noise, pollution or some other disturbances like, natural calamities, etc. The mass may want to fight against the company to maintain a natural and healthy environment or nation. This type of condition can change the customer’s point of view regarding the firm and create a negative image.

Economic Risk

Economic risks arise due to inability of a nation to satisfy its financial obligations. It is very difficult to conduct international business due to changing foreign investment or domestic fiscal or monetary policy because of the effect on exchange rate and interest rate.

Financial Risk

A nation has financial risks due to the fluctuating currency exchange rate, government flexibility in allowing the companies to repatriate profits or funds outside the nation. Also, the taxes that a company pays have the probability of either being advantageous or not. It might be more or less in the host or strong nations.

Terrorism Risk

A terrorist attack opposite to a company or a nation is done intentionally to hurt or cause damage by violence. It is hatred that pushes people to do it and it is usually based on a religion, culture, political ideas, etc. Thus, it is very difficult to operate where the surrounding is tensed and scary and in countries that are likely to be attacked.

Bribery Risk

Bribery is a global issue. Multinational companies must be careful and concerned about it. Companies functioning or marketing at the international level have a major role on combating bribery accompanied by the governments, trade unions, etc.

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