How can a MNC protect itself against political risk?

Advanced Financial Management Block Revision Mock Exams

Steps to minimise political risk
• Investment insurance e.g from multi-national investment guarantee agency (MIGA)
• Forecast political interference in capital budgeting process
• Negotiation with the host government before investing
• Make prior arrangement on issues relating to transfer pricing, profit repatriation etc.
• Joint venture with the host government
• Sale of shares in the host country to raise capital
• Local supply of goods and control of marketing
• Pre-planned disinvestments and cease operations due to political interference

Leave a Reply

Your email address will not be published. Required fields are marked *