1. Risks and Uncertainties in International Business

2. Risk
Definition:
The level of exposure to uncertainties that the enterprise must understand and effectively manage as it executes its strategies to achieve its business objectives and create value (Deloach, 2000)

3. Quantifying Risk
Risk = Probability (of the event) X Business impact (severity of the event)
Difference between risks and uncertainties: risks can be calculated, uncertainties are genuinely unknown.

4. Risk Factors
The risks of doing business in a (different) country are determined by a number of political, economic, and legal factors.
Therefore, generally, there are 3 types of risks in international business: political risks, economic risks, and legal risks

5. Political risks
The likelihood that political forces will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a particular business enterprise

6. Political risks
Therefore, political risks tend to be greater in countries experiencing social unrest and disorder, or
In countries where the underlying nature of society increases the likelihood of social unrest

7. Economic Risks
The likelihood that economic mismanagement will cause drastic changes in a country’s business environment that adversely effect the profit and other goals of a particular business enterprise

8. Economic risks
Economic risks arise from economic mismanagement by the government of a country
Usually interrelated to political risks
A visible indicator economic mismanagement tends to be a country’s inflation rate, and/or level of business and government debt.

9. Legal Risks
The likelihood that a trading partner will opportunistically break a contract or expropriate property rights.

10. Natural (Disaster) Risks
The likelihood that natural disaster will cause severe damage to the company’s assets/ cause major business interruptions

11. Natural Risks 2 types: Nature: Man-made: Nature Man-made
Avalanche, blizzards, droughts/extreme heat, earthquake/tsunami, floods, fires (forest fires), hurricanes, tornadoes etc.
Man-made:
Dams or locks, severe environmental pollution, severe building collapse, explosions, transportation incidents etc.

12. SOURCES OF RISKS Physical environment Social environment
Political environment
Operational environment
Economic environment
Legal environment
Cognitive environment

13. RESOURCES EXPOSED TO RISKS
Physical resource exposures
Human resource exposures
Financial resource exposures

14. Risk Management
The process whereby decisions are made to accept a known or assessed risk and/or the implementation of actions to reduce the consequences or probability of occurrence.

15. Risk management major components
Risk identification
Risk analysis
Risk reducing measures
Risk monitoring

16. End.
Thank you.