Political risks in foreign trade refers to factors that are politically instigated by governments of various trading nations that hinder trading, affect running of business or make investing in these countries difficult or risky. It’s important for any business to conduct a comprehensive study of the trading country receptiveness to foreign investors or traders before committing any investment with that country (Donald A. Ball & Wendell H. McCulloch Jr. 35). Some of the political risks include.
Country laws
Several countries have enlisted laws to guide foreign investments and trade in order to protect their local industries. Some of these laws pose a major risk to international trade. While investing in such countries, investors need find out which laws are against the intended investment, some of the laws involve currency held at any given time, local investor shareholding in any foreign company and local raw materials input on any production line (Kumar 40).
Political stability
Political instability in a country poses a greater risk to foreign trade. Every trader would love to do business where his life and investment are secured. Unstable countries attract minimum foreign investors and at the same time involve themselves in minimal foreign trade also. (Bob 70).
Terrorism
Acts of terrorism in recent past have risen to worrying levels creating panic among traders. This has in turn raised the trading cost among nations as well as causing panic among traders. A country that is more prone to terrorism attacks is usually not attractive to foreign investors.
Labor conditions
Labor is one of major constituents of trade. Some governments have strict labor laws and strong labor unions that may influence the way you perform business in such countries. If these labor relations considerations are not well taken care of, they may pose a risk to foreign trade as some of the businesses will be barred from trading in some countries due to their poor labor relations in those countries. Managing political risks. Depending on the type of risk that exist, the approach taken to manage it will differ from case to case, in the case of country laws, governments need to come up with treaties that encourages free trading blocs where there is free movement of goods and services within the block. Political instability can be managed through concerted effort of aided consultation by the United Nations to ensure peace prevails and trade is conducted in a peaceful environment. Acts of terrorism can be managed through enhanced security by various nations together with the united Security Council and also enhance the insurance policy to cover acts of terrorism. Poor labour relations can be managed through the foreign investors adapting the laid down laws and regulations relating to labour issues and working hand in hand with labour unions to solve any conflict that may arise. Marine insurance
Marine insurance is one of the oldest forms of insurance, marine insurance originated from the word marine, which means voyage by sea. Marine insurance covers risks associated or arising from vessels transporting cargo using sea or ocean as a medium (John, 38) some of the risks covered by marine insurance are as below. Loss or damage of the ship. loss or damage of cargo in transit using sea as a medium of transport, cargo lost at the terminal of destination or loading, crew members accompanying the cargo. Loss arising from natural causes when goods are in transit by sea.
There are several branches of insurance that covers the various risks associated with marine transport. In recent past marine insurances have been expanded to cover acts of terrorism and also hijacking of vessels where this is a major risk in the Indian ocean off the coast of lawless Somalia.
Works cited
Bob, Schmidt. International business and trade. New York press, 2008:p67-89. Print.
Donald, Ball and Wendell H. McCulloch Jr. International Business: Introduction and Essentials .London: Longman press, 2004:p12-48. Print.
John, Hume. The London Assurance Company and the Marine Insurance Market of the Eighteenth Century. Lengthen press, 1958:p36-57. Print.
Kumar, Michael. International business and trade. Freth press, 2008:p23-46. Print.