As of now, the company ABC faces such political risks as changes in governmental policies and laws. Such laws resulted in the suspension of ABC’s license and prolonged processing of the company’s technology. Moreover, the rules involved the abolition of contracts with foreign countries following national interest and state requirements for acquiring a stake in the company ABC. In the future, considering the constant unrest, shifts in the government, state laws, or investment regulations in Bolivia, the corporation ABC might face a multitude of political risks. For example, in 2021, the strikes in Bolivia were constantly illuminated in the news, accentuating the corrupt nature of government officials, rigged elections, etc. (Ramos, 2021). Moreover, the state expresses a desire to seize private property, which was already shown in the history of ABC’s cooperation with the government. As a result, numerous political risks of ABC’s operations in Bolivia are connected with unpredictable changes in state regulations and unrest.
To mitigate the risks of ABC operating on the grounds of Bolivia, the company must pay close attention to the economic and political situation of the country. For example, the company must observe the level of political tension, the size of conflicts, and economic stability that could ensure liquidity. For ABC to reduce the effects of political risks, it can also be crucial to have political risk insurance. When working in emerging markets, a variety of risks can expose a company to challenges and financial losses. As a result, considering the mentioned risks of the Bolivian government, which include unrest and conflicts, political risk insurance can cover the destruction of assets. Moreover, political risk insurance can guarantee compensation for the non-fulfillment of contracts (Haendel & Jordan, 2019). Consequently, the foreign firm in such an unstable emerging market must oversee the economic and political stability and obtain insurance.
Reference List
Haendel, D., & Jordan, A. A. (2019) Foreign investments and the management of political risk. Routledge.
Ramos, D. (2021) Bolivia unions go on strike as political tensions rise. Reuters.