Question

How are MNCs subject to political risk? Stated differently, in what manner are MNCs exposed when it comes to political risk?

I. Transfer Risk
II. Operational Risk
III. Control Risk
IV. Presidential Narcissism

Group of answer choices

I, II, III, IV

II & III only

I, II, & III only

I & II only

I, II & IV only

Answer 1

ANSWER: I, II & IV only

The political risk that MNCs faces is the political decisions taken by host country. They directly impact the business of the MNC in the home country.

This political risk involves:

Transfer risk is purely political factor as this risk means the risk associated with the conversion rates that affects the MNC in international level. It is a threat to MNC of home country when they are unable to convert their currency due to political changes in host currency.

Operational risk is due to employee error. There will be mix of employees when it is MNC and due to political factors, employees come from host country and they have their own way of working and there comes the risk in the operations of the business.Same goes with the employees going from home country to host country,

Presidential Narcissism comes when the political decisions taken by The President are too narcissist, considering only the developments of host country and that affects the MNC in home country.

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