A large Indian multinational corporation, "Global Ventures Ltd.", is planning to set up a manufacturing plant in a developing foreign country. As…
CA Final · Advanced Financial Management · PYQS · January 2026
A large Indian multinational corporation, "Global Ventures Ltd.", is planning to set up a manufacturing plant in a developing foreign country. As part of its due diligence, the board is concerned about the potential impact of Political Risk on its investment. In the context of international operations, you are required to: (i) Identify four specific actions by a host country's government that can signal the presence of Political Risk. (ii) Recommend practical techniques to mitigate political risk exposure in foreign operations.
Suggested Answer and Working Notes:
(i) From the following actions by the Governments of the host country this risk can be identified: Insistence on resident investors or labour.Restriction on conversion of currency.Expropriation of foreign assets by the local govt.Price fixation of the products. (ii) Following techniques can be used to mitigate this risk. Local sourcing of raw materials and labour.Entering into joint venturesLocal financingPrior negotiations
Topics: International Financial Management
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