Geopolitical Issues Impacting Cross-Border Business

This article discusses the impact of geopolitical issues on cross-border business, specifically on Walmart. It highlights the need for geo-political risk management strategies and suggests ways to mitigate operational risks. The article also provides insights into currency risks and how to manage them. The subject is relevant to international management and business courses.

Running Head: GEOPOLITICAL ISSUES IMPACTING CROSS-BORDER BUSINESS
Geopolitical Issues Impacting Cross- Border Business
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1GEOPOLITICAL ISSUES IMPACTING CROSS-BORDER BUSINESS
To- The Leadership of Walmart
Date – 12.09.2018
Subject- Executive Memo on Geopolitical Issues Impacting Cross-Border Business
Dear Sir
The aim of this memorandum is to call your attention towards the need to mitigate
operational risks regarding geopolitical issues impacting cross –border business of Walmart. It is
known to everyone that the years after the global financial crisis have been difficult for the
government as well as for the business industry. The US and Europe specifically have witnessed
political change consistently. The political changes have either increased or decreased the
international relations and at the same time influenced the business dealings across the border
(Gemechu, Sonnemann & Young, 2017). However, that age has been evaporated and given rise
to a special kind of difficulty named as the ‘geopolitical risk’.
Today, the most crucial geo-political risk is that there is huge uncertainty among the
industrial territories and the way they interact with each other. The regulations, opinions and
initiatives are not being established from the same base (Deresky, 2017). An example can be
taken of the regional pressure in the Middle East. This type of geopolitical risk in continuously
evolving and influencing the companies in some other ways. The latest example of geopolitical
threat is the sanctioning of US on Russia. Although it is common for the global companies, the
difficulty arises when the possibility of Russia’s retaliation increases that places the regional risk
as a primary global concern (Nelson, 2015). The cross-border trade, currency inconvertibility
and the tax reforms are the kind of geo-political risks which are disturbing the multinationals to
proceed and plan strategically. The regulatory risk has been considered to be the most significant
risk in the trading field. Many companies face the politically –driven losses in exchange rates.
According to a latest survey the US has been mentioned as the most unpredictable country where
the geo-political risks are rising which is harassing the companies in creating supply chain and
strategic planning.
In 2017, President Trump withdrew the United States from the Trans-Pacific Partnership
(TPP) trade agreement as well as from the Paris Agreement on climate change (Hiro, 2018). In
October 2017 President Trump indicated his displeasure by rejecting to certify that Iran is in
acquiescence with it (Hiro, 2018). This has threatened the business relationships between US and
Iraq and the traders are getting highly disturbed in trading with each other.
Walmart is facing operational challenges in its international business dealings. Walmart
has a remarkable number of stores around the globe than it has in the US (Walmart.com, 2018).
Recently the company is facing decline in revenue in its cross-border trading due to the adverse
movements of currency and the rise of US dollar (Walmart.com, 2018). The US dollar
appreciation has considerably reduced the repatriated bulk of money from the cross- border
trades. The reform of monetary structure is a result of geo political regulations and changes
which is highly impacting the business operations of the multinational enterprises. The
withdrawal of the US from the world stage is also impacting the business relations of the
company with its associate countries (Walmart.com, 2018). The geo-political fluctuations are
giving rise to fund transaction problems from the stores beyond the US borders. Tax problems
are also disturbing the business operations of the company (Walmart.com, 2018).

2GEOPOLITICAL ISSUES IMPACTING CROSS-BORDER BUSINESS
In this respect the company can operate strategically to avoid such problems.
International enterprises like Walmart have various options to manage the currency risks. The
company can apply tools like currency futures, or currency –hedged funds (Moschella, 2015). An
alternative plan for hedging against currency risks can be the exchange –traded funds (EFTs)
which are currency focused (Moschella, 2015). The Walmart company can also use the geo-
political risk protection policies to avoid operational risks like financial inconsistency
(Moschella, 2015). The best way to avoid currency inconvertibility is to have accounts in the
regional banks of that country which the company is dealing with (Moschella, 2015).
Therefore, from the above discussion it can be seen why geo-political risk management
strategies are needed in an organization, how they are affecting the cross-border trades and what
are the possible ways of mitigating the operational risks. Keeping in view all the aspects of the
topic the next action plan of the Walmart company must be establishing a geo-political risk
insurance policy. Second is to have multiple suppliers and vendors in the selected country or
region. The next is to have funds in the local banks of the selected region to avoid currency
inconvertibility issue. The multinational companies like Walmart can strategically avoid the
geopolitical threats by acting likewise.

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References
Deresky, H. (2017). International management: Managing across borders and cultures. Pearson
Education India
Gemechu, E. D., Sonnemann, G., & Young, S. B. (2017). Geopolitical-related supply risk
assessment as a complement to environmental impact assessment: the case of electric
vehicles. The International Journal of Life Cycle Assessment, 22(1), 31-39.
Hiro, D. (2018). Donald Trump Makes the United States More Dispensable Than Ever. The
Nation. [online] Available at: https://www.thenation.com/article/donald-trump-makes-
the-united-states-more-dispensable-than-ever/ [Accessed 13 Sep. 2018].
Moschella, M. (2015). The institutional roots of incremental ideational change: The IMF and
capital controls after the global financial crisis. The British Journal of Politics and
International Relations, 17(3), 442-460.
Nelson, R. M. (2015). US Sanctions on Russia: Economic Implications. Washington, DC:
Congressional Research Service.
Walmart.com. (2018). Retrieved from https://www.walmart.com/