Question

A risk which associated with the overseas operation is the managment approach and process along with the understanding the nature and the working of employees. Please explain and discuss.

Answer 1

A business risk is that anything effects the company’s profit and it leads to fail of business. Normally 3 types of business risk i.e. business risk, non-business risk, financial risk. Here in the given scenario the risk associated with overseas operations or we can say that risk in international business may divided into 4 major types.

1. Country risk

2. Political risk

3. Currency risk

4. Regulatory risk

These risk separately we can explain that country risk is the risk that related to the policies and situations of country of operation. Political risk is that it relates to the political scenario in the country of operation. Currency risk is mainly coming along with the foreign exchange transaction. And the last one regulatory risk is associated with international trading associations.

These risks are controllable in nature within a certain point. The country risk and political risk cannot controllable in nature because of the situations is not under control of the business. But the management can take a decision that the operations in that country is needed or not. In high risk countries prefer that no need to operate the business.

The other two risks are controllable by the management that is currency risk and regulatory risk. Currency risk is that it arises at the time of exchanging foreign currency. This can controllable that the company management put their attention at the time of transaction. which means that the transaction done by the employees but there is a check must do by the management at the time of foreign currency transaction. The next risk regulatory risk which is related to the international trading associations. This kind of risk is controllable by management by way of pressurising in trading organisations after checking the situation in the markets.