POLITICAL RISK

Political Risk

Political Risk

Introduction

Political risk - is the possibility of loss or reduction in profit margins resulting from government policy. Thus, the political risk associated with possible changes in the course of government, changes in the priority areas of its activity. Consideration of the political risk is particularly important in countries with yeasty legislation, lack of traditions and culture of entrepreneurship. Political risk is inevitably inherent in business activities, one can not escape from it, you can only truly appreciate and take into consideration. It should be noted that attempts to take into account the political risks caused by the actions of individual governments or government officials, date back to the XIX century. Thus, the famous banker Rothschild so organized system of information on political developments that have received reports of a few days earlier than the government.

The concept of "political risk" appeared in the lexicon of American corporations in 1959 after coming to power in Cuba, Fidel Castro. One of the first studies on this issue - the book Ruth F. "U.S. Business Abroad and political risk," where was analyzed political risks to the activities of American companies in other countries.

The importance of considering the impact of political risk on the performance of entrepreneurial firm says that for the analysis and evaluation of political risk created a global network of specialized analytical centers for both commercial and non-commercial nature. In developed countries, there are more than 500 such centers, most of which are located in the USA. The most famous non-profit centers, studying political risk mainly in theoretical terms, are the Center for Strategic and International Studies at Georgetown University, Research Center of international developments at Columbia University (New York).

Discussion

In general, risk means the possibility of occurrence of some adverse events entailing various types of losses (eg, physical injury, loss of property, income below the expected level, etc.). Entrepreneurship has its share of risks, which should take the entrepreneur, the nature and extent of the risk. RF Law "On enterprises and entrepreneurial activity" defines entrepreneurship as "proactive, independent activities of citizens and their associations, is at your own risk, under its financial responsibility and aimed at making a profit." Thus, the legislation found that entrepreneurial activity in any way associated with the risk.

In business under the "risk" is commonly understood as the probability (threat) of losing all of their resources, revenue, or the appearance of additional costs resulting from the implementation of specific operational and financial performance. Political risks which are associated with the process of government intervention in individual countries, both in terms of the overall economy, as well as the separate sector, creates the likelihood of such changes in economic structures at the macro and micro level , which may significantly worsen the conditions without prejudice to legal rules for the functioning of many businesses. It can be a source of violent and unexpected changes in financial flows and affect the decline in market value of its investments. Considering the negative effects of the impact of political ...