Geopolitics, International Environment and Business
International risk management
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Geopolitics, International Environment and Business
Risks identification Are we leading towards economic war?
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Geopolitics, International Environment and Business
Several agencies seem to reinforce this idea, particularly regarding international trade
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“Public economic warfare”
Japan JETRO, Japan External Trade Organization (www.jetro.go.jp)
Created in 1958 to promote Japanese exports From the 80s it expands to developing countries. 21st century: To promote FDI into Japan To help small & medium sized companies to export.
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USA (1992, 1993): Bill Clinton ...view middle of the document...
weforum.org/global-risks-2013/
Source: Global risk 2010 WEF
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Source: McKinsey, Risks seeing around the corner
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Geopolitics, International Environment and Business
Risks identification Major international risks Political and Country risks
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By definition
Forfeiture / Expropriation / nationalization (Iran & oil companies, Bolivia & gas/oil, Argentinean oil 2012)
Non transfer / unconvertible local currency State /public company non payment
Politics influences how markets operate. Often the most unpredictable
economic events are political in origin, the result of flagging political willingness or capacity to maintain consistent and predictable economic environment . PWC survey, 2010
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Country risk – Political risk
Security (political) concerns
Revolution, Civil war, Clan wars, Takeover Terrorism, Hostage Psychology of the leaders Economy (debt, commercial balance ..), boycott Financial crisis, changes in international regulations and laws Increasing taxes Contracts cancellation Frauds & corruption (Transparency) Racket Prevention or not of natural disasters Environmental policy and law
Political changes
Business changes
Criminal concerns
Natural concerns
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Country risk – Legal risk
Liability & repression could be different
Company law Fiscal law / tax evasion / bilateral treaty Accounting law Social & labor law Environmental law
International law
1973: Convention of Washington 1997: protocol of KYOTO (less emission of CO2) 1988: Basel I, published a set of minimal capital requirements for banks 2004: Basel II, recommendations on banking laws and regulations
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Geopolitics, International Environment and Business
Risks identification Major international risks Competitive risks
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Competition rules
Entry/exit barriers (absolute cost advantages, proprietary learning curve, access to inputs, economies of scale, capital requirements, switching costs, access to distribution, proprietary products …)
New competitors (same products)
New firms in emerging countries Firms looking to increase benefits on (new) profitable sectors Technological capabilities enhancement Examples: BRIC, Apple & IPhone => computers/mobile phone
Substitute products
Switching costs, price-performance Buyer inclination to find alternatives Technological rupture Examples: mobile phone/camera & photo, Minitel & Internet …
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Joint Ventures
Who rules the firms? Real ownership? power of decision / influence Breaking the rules / contracts free rider
Transfer of technology
“process of sharing of skills, knowledge, technologies, methods of manufacturing, samples of manufacturing and facilities among governments and other institutions to ensure that scientific and technological developments are accessible to a wider range...