For multinational companies, political risk refers to the risk that a host country will make political decisions that prove to have adverse effects on corporate profits or goals. Economic and political risks will be intertwined in 2020. Political risk has increased in a number of Latin American countries, as governments find it increasingly challenging to balance economic reforms and social stability. Political risk is a type of risk faced by investors, corporations, and governments that political decisions, events, or conditions will significantly affect the profitability of a business actor or the expected value of a given economic action. Adverse political actions come in a range, from events like widespread destruction due to revolution to financial changes like new laws that prevent the movement of capital. Wrongful cancellation by government of permits, licenses, or concessions. Fiscal challenges will limit governments’ ability to respond to protesters’ demands. The tech industry is expected to emerge as a particular battleground for the two countries, as both look to reduce technological dependence on the other. 3. North Korea will be cautious to maintain personal goodwill between its leader Kim Jong-Un and President Trump, but will be reluctant to give up its nuclear weapons program in exchange for sanctions relief. 9. - Source: Coface. Unexpected political events (e.g. Multinational companies could go to one of the many organizations that specialize in selling political risk insurance and purchase a policy that would compensate them if an adverse event occurred. Political Risk The risk that a foreign government will significantly alter its policies or other regulations so that it significantly affects one's investment. Chinese telecoms firm Huawei embodies these challenges — the US has increased pressure on allies to not use the company’s technology — a situation that is unlikely to change in 2020. All in all, regardless of the type of political risk that a multinational corporation faces, companies usually will end up losing a lot of money if they are unprepared for these adverse situations. A couple measures can be taken even before making an investment. Technological Change The risk that technology investments will become obsolete. The EU will look to offset Brexit’s financial impact by seeking increased member contributions to its budget, while the new European Commission President, Ursula von der Leyen, will seek to launch plans for a European “Green Deal” in 2020. Political Factors Affecting Business Impact on economy. A micro-hedge seeks to minimize the risk of just a single asset from a larger portfolio. Drawing on data from Fitch Solutions, Marsh’s Political Risk Map 2020 explores the changing risk environment, highlighting the implications for firms operating globally. While the Political Risk Map 2020 highlights a challenging geopolitical and economic outlook, there are pockets of significant opportunity. Blockage of cross-border cash flows due to currency inconvertibility and non-transfer. Physical damage to assets due to political violence, including war, and resultant losses of business income. Governments could alter their rules and regulations. With Canada also expected to sign the deal into law shortly, its implementation may alleviate concerns among businesses of supply-chain disruption in North America. For multinational companies, political risk refers to the risk that a host country will make political decisions that prove to have adverse effects on corporateÂ profits or goals. Even worse, a revolution could spawn a new government that does not honor the actions of the previous government. 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