Considering Risks in International BusinessJoin now to read essay Considering Risks in International BusinessCONSIDERING RISKS IN INTERNATIONAL BUSINESSBusiness by itself requires high awereness of risks, taking these risks, managing them and gain profits from them. The literature names this task as “entrepreneurship”. Entrepreneurship is the practice of starting new organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started.
Turning to international business, the situation seems hazier. In the international area the risks are less identified, more difficult to take and manage. The environment, cultural development and social structure are not stable, often changing, hence there are not certain single solutions over risks, it needs following changes in political, economical and natural aspects, high flexibility and quick response. On the other hand the business form is also one of the most important task to consider. However the business shall be a simple international trader (exporter-importer) or highly integrated with other societies such as multinational companies.
To measure the extent of these risks we can divide the environment commonly into three catogories. First of all the business form has to take the economical risks into account, than it must consider the risks may arise from politcal environment and finally the natural risks should be investigated.
From the wiev of economical risks, the business which is investing in international scope searches informations such as: the type of the economic system, economic size and stability, growth rate, GDP, GNI, PPP (Purchasing Power Parite), inflation, existence and influence of capital markets, availability of economic infrastructure and ability or intention to meet its financial obligations of the revelant country or countries. It isn’t hard to imagine these indicators are not stable and not easy to forecast. However, there will always be some organizations enjoying benefits by managing this fluctuation risk. Economic risks arise from economic mismanagement by the government of a country. Economic risk can be defined as the likelihood that economic mismanagement will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a particular business enterprise.What will make it more risky; the economy size of the country would be small or large? Developed or developing? The answer no-doubt would be large size and developed country. Because, the business can operate more free and with more opportunities in large size and developed economies. High inflation and imbalanced interest rates, low GDP, GNI and PPP rates, unability to fulfill the financial obligations are the potential risks could arise from economical situation in a country.
When we consider the political risks, we see it is often integrated with the economy. The impact of the political system on management decisions in international business arises from political risks. Political risk is when international companies fear that the political climate in a foreign country will change in such a way that their operating position will deteriorate. If the political actions are aimed only at specific foreign investments they are called micro political risks where the political actions affect a broad spectrum of foreign investors they are called macro political risk. The causes of political risk are: -Changing opinions of political leadership which occurs in unstable governments or governments that suffers from lack of policymaking -Civil disorder which can occur when there are human rights
The Globalization of Corporate Governance (Gram, 1991)
It will be remembered that multinational corporate governance has an impact on human-level decision making and human-level organization. As many aspects of a multinational or multinational executive’s job development need to be defined, the processes necessary for that management and for decision making to work well. In this article I will describe some of the current problems facing multinational corporate governance and what the future could hold. I will try to present some ideas about the implications that this article will have for our understanding of the global corporate governance process and the implications of these ideas for our own life.
In 2001 I wrote a article entitled “Global Governance: The Future Is Not Yet here”. It presented a new view of the structure of global corporate governance, which is that a major part is the responsibility of the executive. In a previous article I outlined on the role that people’s expectations of a “new world order” can result from a society that makes big business and multinational corporations, not just the global corporations, play such a major part. As I mentioned I want to stress that in the present crisis and the ongoing crises in financial, social, environmental and other forms of state services, there are various ways in which the state could intervene but also that these actions would change the context. As such, most people would not know it was all wrong to be “too big to fail” even if there was a good reason for how the risk assessment would be based.[2]
I hope this book will also shed light on how in the last few decades the “global” has begun to become “too big” to fail. It has begun to become increasingly visible and is more and more popular within the global corporations as an example of how the problem of governance is being confronted by the international system.
In my book Global Governance (2007), I stated: “It is not enough not to be a ‘corporate monster’ that will never do wrong. We must be a “good system, democratic, democratic and not merely ‘bad’.” This is important to explain because in international corporate governance those who rule outside the rules of the system must act in a way that doesn’t conflict with the rights that are created in people’s own minds. In this way we could not just be good and responsible because I think this would make us all better.”[3] This might put us in a situation where I may not know to have done everything right.
A critical factor in the failure of global democracy to hold the global corporation accountable is the institutionalization of corporate money for the benefit of a few central officials who are unaccountable. What is happening with these officials is that they decide which actions are acceptable and which are unacceptable. They decide on which actions take place in the corporate system so that executives who have influence over them are able to make the decisions based on the results of those decisions and are rewarded for those decisions. By these standards, it could be argued that it is more difficult to do the right thing in international corporations because they may come with the “bad idea”. This should also have been the case with political reforms. It seems plausible that an effective, representative democracy would be one in which there was a good and independent choice among the leaders but it would make no sense to make such an action just because certain leaders came with a negative political agenda