Question

In 175 words or more, explain how to manage cultural risks and other factors related to a foreign operation of a multinational business. Is cultural, business, or political risk more challenging to overcome than one of the others? Why or why not? How should American standards influence multinational businesses? Thanks in advance

Answer 1

A detailed risk assessment is required for managing the different types of risks involved in foreign operations off a multinational business. Firstly identification of the different risks should be done carefully and after much research. The market potential should be carefully assessed and currency exchange fluctuations should be taken into consideration. The biggest challenge in foreign operations is cultural differences. These are not only difficult to understand but also difficult to tackle since they require deep understanding and adaptability skills. As compared to political and economic risks, cultural risks face a greater challenge. This is because there is no data available as to the cultural risks involved. Political risks can be estimated with the help of assessment of the current political situation of the economy . Similarly economic risks can also be estimated with the help of past data and forecasting techniques. Cultural risks on the other hand are difficult to forecast.

Cultural risks can be managed with the current planning, monitoring and execution. Understanding the alien culture before stepping into the foreign market and incorporating it into the business plan is of importance. The American standards have long accepted foreign culture due to the huge migrant population. Studying the foreign culture where the business is going to be set up is not a difficult task for the Americans. The standards also encourage inclusion and absence of discrimination and hence the cultural risks can be managed once identified.