There are numerous risks, which domestic firms doing business overseas face. The distance between two nations,...

There are numerous risks, which domestic firms doing business overseas face. The distance between two nations, along with the unfamiliarity with foreign nation’s laws, spurs a plethora of risks that complicate business relations and transactions. In addition, the differences between two nations currencies and culture elevate the potential for business dealings to go awry.

Discuss three additional risks that may complicate doing business overseas.
Discuss what you believe to be the most significant risks for a restaurant that wants to expand to an overseas market.

Expert Solution

1) The additional risks identified while doing business overseas are as follows-

1. Interest rate risk- The fluctuations in interest rate structure of one country can affect business in which it operates. The rise in variation of interest rate risk gives birth to inadequacy in markets. Moreover, fluctuation in floating exchange also affects interest rates.

2. Credit risk- It is the risk that party in overseas market or debtor may fail to honor his obligations leading to bad debts. It is present in foreign exchange and international trade.

3. Settlement Risk- It is one of the important mechanism as to settle down payments. Failing to settle payments due to time difference leads to occurrence of settlement risk.

2) Most significant risks for restaurant expanding overseas are listed as under-

Liquidity Risk- Inadequacy of liquid funds tends to occurrence of liquidity risk. This is because restaurant business is cash-intensive industry requiring proper flow of funds to carry on business.

Risk of low sales- The restaurant business may have everything under its roof starting from diversified menus to quick staff, but may experience risk of low sales. This is because inexperience to handle wide range of customers at peak times.

Risk of High costs- Opening restaurant requires capital for food, labor and ancillary costs like rent, utilities and marketing. Thus, proper planning is required as such costs may hamper sales and eradicate profits.

jeff jeffy answered 6 months ago

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