Political Risk from the Perspective of International Business: Types, Assessment and Management


Local companies have exponentially initiated to run their business activities abroad within the effect of globalization. There are a few determinants that underlie at the background of these businesses’ desire for internationalization. In this respect, political risk has been drawn attention due to having a crucial role in running business activities and selecting the most optimal location. From this point of view, the present study aimed at being fulfilled a clear the need of research specifically in Turkish literature in the scope of being identified the political risk phenomenon and its types which companies might be exposed in the process of international business activities and risk avoidance via carrying out risk assessment or turning the risk into an opportunity or minimizing the risk through appropriately managing it. It has been seen that the types of political risk consist of general instability risk, ownership and control risk, operational risk, and transfer risk within the frame of the study. Additionally, it has been determined that political risk assessments fundamentally include three steps such as the assessment of issues of relevance to the firm, potential political events, and probable impacts and responses. Moreover, integrative strategies, protective and defensive strategies, and combination strategies have been principally remarked in the sense of political risk management. In this regard, it has been signified that political risk insurance, gradually increasing business activities, joint venture with local company and providing local employment, developing closer relationships with the host country dynamics and using local financing, operational hedging (setting up multiple plants to spread risk), and addressing legal bodies have been drawn attention as sub-strategies.


Keywords


Internationalization, Host Country, Political Risk, Risk Mitigation

Author : Onur Başar ÖZBOZKURT
Number of pages: 411-428
DOI: http://dx.doi.org/10.29228/TurkishStudies.40446
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Turkish Studies-Economics,Finance,Politics
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