Question

What are the factors that contribute to the risks of doing business in a country?

Answer 1

Few of the factors that contribute to the risks of doing business are :-

Market Fluctuations
The amount of fluctuations that happens in a economy affects the business in any country. The economic cycles, shifts in demand and supply, market conditions, rate of inflation, production, storing etc all play a major role in contributing towards the business cycle. The market situations and downturns can lead to decline in the demand and increase in the production and the sales prices and finally deterioration in the profits.

Exchange rates and interest rates
Any business is all dependent on the exchange and the interest rates of the country. The business has to be dependant on the foreign currencies and its rates. Also the business takes loans for its activities in the country so the interest rates of loans etc also determines the level of business in the country.

Natural Disasters
Earthquakes, cyclones, typhoons, floods etc are some of the natural disasters which affects the business as due to these disasters the groups business operations will be affected. The after effects of these natural disasters are very dangerous, it will almost or fully destroy the equipments, infrastructure of the business operations and that will affect the supply and production of the business. They definitely contribute to the risk of doing business in a country.

Competitions
Another very important and unavoidable factor that adds to the business risk are the competitions. If the industry is severly competitve then the business has to face fierce competition from the rivals and that will affect the productivity and sales of the business. The company has to take various decisions in order to retain their business and maintain their position in the market amongst the rivals and fairly do the business and try to earn maximum profits.

Strategies
Various strategies also affects the business operations. They add to the risk factors. The economic, political, management strategies all affects the acitivities. The company has to take care of all these factors and risks while establishing business.

Finance
Funds are the main component in doing any business. They form the base of all the acitivities. The company has to procure funds by borrowing from financial institutions . That is certainly a matter of risk to the business entity as there may be cases where they might not get enough funds and that will in turn affect the business.

Quality
Though quality is the primary point to be kept in mind while doing a business but many times it will become a risk as if desired quality is not maintained. When it comes into notice once dispatched and the end customers get them then it will become a serious issue and there are chances that it will affect the business and its profits and productions

Legal Restrictions
The legal laws of any country affects the business operations too. The company has to abide by the legal formaliities and if those are not in their favour or are strict enough then it will surely affect the operations. The laws will affect the business activities and it is possible that they may incur losses too.

Environmental Factors
Different countries have different types of environment. The business entities have to get adjusted to it. But many times it becomes a challenge for them. The environment of any place helps the business to either flourish or to deteriorate. Issues like global warming, pollution, industrial waste, etc all play their roles in developing the business.