Explain the types of political risks that face multi-national firms in foreign countries.

Political (sovereign) risk is a probability that political event will impact adversely in the domestic and foreign firms. The host government may interfere with the operations of a MNC in anumber of ways:
• Non-discriminatory interferences e.g no transfer price, non-convertibility of the currency of host nation etc.
• Discriminatory interference e.g special tax rates, government insisting on a joint venture with MNC etc.
• Discriminatory sanctions e.g. ending the right to remit or repatriate profits
• Wealth deprivation i.e takeover of a MNC by the government without any compensation.
• Anti-trust policies
• Fiscal & monetary policies e.g invest a portion of liquid cash in government to bills and treasury bonds etc.

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