Political risks in international business - case study

In a competitive and increasingly internationalized business world, many companies rely on the high risk of operating in unstable areas. Those companies willing to engage in other countries can often be exposed to a politically volatile environment over which they have little control. I focused in this thesis on political risk, because it is one of the most hazardous challenges that an international business can face. Although political risk is not a new phenomenon, concern over it has increased significantly in recent years. This new prominence has been reflected in an outpouring of articles on the subject in the business press, wider academic attention, commitment of resources to access political risk by a significant number of international firms, and large number of consulting firms offering services to help management to come to grips with political problem abroad. Political risk as potentially significant managerial contingencies is generated by political events and processes. But that statement begs a number of important questions. First, and perhaps the least tractable, is the scope of the relevant environment in terms of the specific meaning attached to political events and processes. Second, defining political risk in terms of contingencies suggests the presence of uncertainty. Third question is, whether political risk discourage Foreign Direct Investment (FDI). The accurate assessment of political risk can make the difference between success and failure for the company. While environmental or political risk assessment has become an explicit function in many companies and is inherent in all foreign investment, the uncertain ties of foreign political environments continue to pose critical problems for managers. This thesis also aims to provide space for theoretical support to political risk assessment. It explores methods, institutional and organizational basis of political risk assessment. Last chapter is devoted to looking at the political risk problems in Brazil, and the risks that firms might face by doing business in the country. With growth set to continue, it has been forecast that by 2025 Brazil will become the world's fifth largest economy, overtaking Britain and France, while Sao Paulo will rank higher than Paris and Shanghai as the world's sixth wealthiest city. Many of investors see growth opportunities in Brazil's mining, energy, and agriculture sectors. Infrastructure presents another opportunity. With the 2014 World Cup and the 2016 Olympics being held in the country, many companies in the communications and tourism industries stand to reap the rewards.