Risks Multinationals Encounter in International Business

Introduction

Reducing risks is crucial for a business’s expansion and development. The numerous risks multinationals encounter in international business significantly affect their operations. Instability in a nation’s politics and economy can lead to many challenges, such as intolerance among the inhabitants there, currency fluctuations, and unpredictability in extracting raw commodities (Kot & Dragon, 2015, p. 103). Due to market uncertainty’s impact on stock price volatility, currency instability, and interest rate swings, businesses are affected by financial risks (Dinu, 2015, p. 93). Unfavorable rules, such as government laws, and tariffs, increase the risks for global enterprises (Dinu, 2015, p. 93). According to Dinu (2015), biased market data meant to help locals results from regulation, intellectual property rights, and adverse competition, which negatively influence enterprises. Identifying and reducing threats is essential for growth and competitive advantage, given the inevitable hazards in the global corporate environment.

Risks to Financial Security in International Business

The financial strength of a country affects its residents’ purchasing power. The financial objectives of foreign corporations will, therefore, be impacted by the level of the economic prosperity of the nation’s population. Employment levels, consumer income, and interest rates are a few factors that affect how much people buy in terms of goods and services. For example, nations with high unemployment rates have lower purchasing power, which affects the business climate. Financial concerns, such as increased labor expenses, are faced by foreign enterprises. To prepare for probable operating losses, these companies should research and estimate the strength of a nation’s economy.
Regulatory frameworks and quality standards on the global market impact demand and supply. Understanding a foreign jurisdiction’s legal requirements and quality standards is crucial. International enterprises may be able to avoid losses, including regulatory fines, by correctly training personnel on market information and policy requirements. Schlumberger Limited, an American firm, was penalized by the Iranian government for breaking the rules and regulations (Patrucco, Scalera, & Luzzini, 2016, p. 333). A business must consequently build effective strategies for handling potential financial risks on the market for efficient operations and cost savings…