Avoiding the Risk
Companies face political and economic risk whenever they conduct business overseas, but there are usually ways to reduce the risk. The most important step is learning about and understanding the host country’s history, political background, culture, and current policies and political climate before making a long-term investment decision. It is also necessary to have a high degree of sensitivity to country-specific approaches and concerns so that the company blends into the local landscape and doesn’t call attention to what is different.
If a country’s citizens feel exploited by global companies, government officials are more likely to take action against those companies or others like them. Reduce that risk by being a good community citizen. Hire and train local people. Pay well. Be a leader the community. Show that the company is willing to share the fruits of its labors with nationals by forming joint ventures with local partners. In addition, be certain to monitor local political developments through local partners or by contracting with a firm that specializes in this service.
It is also possible to purchase insurance to cover losses that might result from political situations – most developed countries offer insurance programs for their companies doing business abroad. . Germany offers its companies an export credit guarantee known as Hermes cover. In the U.S., The Overseas Private Investment Corporation (www.opic.gov) offers insurance.
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