Country Risk

• country risk is sometimes called political risk
• country risk: exposure to potential loss or adverse effects on company operations and profitability caused by developments in a country's political and/or legal environments
• dimensions of country risk prevalent in international business:

  1. government intervention
  2. protectionism
  3. barriers to trade and investment
• Coca Cola's business suffered in Germany after government enacted a recycling plan that required consumers to return non-reusable soda containers for 0.25 euros
• Hilton Hotel chain was fined $700,000 in 2017 for data breaches that compromised more than 350,000 credit card numbers
• after the Hilton Hotel breach, the EU enacted a new law, the General Data Protection Rule (GAPR) under which Hilton *would* have had to pay $420 million, or $1,200 for every compromised record
• Venezuela is dominated by an unpredictable, dictatorial government
• Zimbabwe remains under authoritarian rule
• Libya is risky in the wake of civil war and political instability
• Canada, Japan, and Singapore are characterized by stable, transparent, and well founded political and legal systems
• risk tends to be lower in countries with a favorable legal climate and political stability
• risk tends to be higher in countries with political instability and substantial government intervention