Question

Identify the risks that an MNC face in having foreign direct investment in a country, and determine the mode of strategy used for the FDI in the country where Novagold has presence

Answer 1

Q: Risk of MNC faces in having FDI in a country:

Ans: Country Risk: It is mainly risk associated with country's business environment and growth factors.Cross border acquisition ans transaction can be affected due to MNC action for FDI in another country.

Political Risk: It is the risk of political institutions that changes the governemnt control,social and non economic facors. It may make changes in political parties decesion taking ability , governemnt mode of opertaion on politics , traditional political practices etc. It also includes law and order of country.

Economic Risk: This risk mainly arises from expected return from investment. Changes in economic policies like fiscal and monetary policy, inflation rate other bank rate usually affect FDI investment.

Transfer risk and Exchange rate risk: Transfer of payment like, loan sanction for investment, Currency exchange rate regime also pose risk on FDI investment analysis.

Cultural Risk: When MNC of one country do FDI investment in another country cultural barriers comes to play here. This risk must be tackled by management of company.

Strategy for FDI investment in Novagold presence country:

• This is the main factors when no of companies from different countries make investment in nova gold presence country. Strategy for FDI starts when they follow proper regulation and laws for target country or host country , where they intent to invest their money.
• Novagold is the resourses which is achieved after mining process.The mining resourses are both capital and labour intensive although thhese mining factries are large or small.
• Some major countries like Austrailia, U.S ,England invest money in these resouces to develop their effectiveness and development of their mining community.
• These novagold presence country are Ghanna, south africa and other .
• These companies should follow their cultural practices.