The most important aspect of international risk management for a manager is navigating political and legal risks. A manager must be conscious of the political climate of the country in which the company has set up its enterprise. Similarly, they have to be aware of the laws that govern businesses. Familiarity with the political and legal policies of the countries of operation is critical for a manager since organizations are influenced by these factors.
International risk management entails handling political risk which may threaten the interests of a business. For instance, government activities, such as output restrictions and price controls may affect a company, thereby reducing sales. Political risk may also stem from war, labor strikes, terrorism, or any other activity that results in instability (McCubbrey, 2015). Political unrest is one of the major factors that can derail operations. Thus, managers must stay informed on the political issues going on in all their countries of operation.
Political risk is closely tied to legal risk, which is the threat that arises from contraventions of the law. It is whereby an organization fails to meet legal mandates, such as following the right accounting procedures (Cote, 2020). For instance, a manager may be unaware of all the stipulations included in the anti-trust laws of a country. This increases the likelihood of businesses unknowingly engaging in practices that promote unfair competition.
In conclusion, when a business operates in a foreign country, it is affected by the politics, policies, and relations of that country. Being ignorant of the nuances of foreign politics and laws could lead to the fall of an enterprise. A manager can minimize risk by hiring professionals who are familiar with the political-legal landscape to advise the business on appropriate actions. With time, the manager will themselves become conversant with the foreign policies.
References
Cote, C. (2020). 5 common challenges of international business you should consider. Harvard Business School. Web.
McCubbrey, D. J. (2015). Political and legal risk in international business. Global Text Project. Web.