Political Risk Management

Running head: POLITICAL RISK MANAGEMENT
Political Risk Management
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1POLITICAL RISK MANAGEMENT
The main scope of the assignment is to deal with the political risk analysis of a
manufacturing company expansion at Venezuela. The political risk may be stated to be said
as a risk, which arises in a company due to some political changes in a country. Because of
these political changes, the return from the investment of the company could be hampered in
various ways (Brink 2017). The instability of a political satire of a country includes the
causes like change of government or the legislature bodies as well as some other foreign
policies that affects the political scenario of the country.
This assignment portrays the picture of a manufacturing company that wants to
expand its market in Venezuela. However, for some unavoidable political scenarios in
Venezuela the CEO of this manufacturing company wants a clear review before the
expansion of the company (Giambona, Graham and Harvey 2017). This report will provide a
clear critical analysis of the risks that are present in the expansion procedure and will suggest
about the possible and probable solutions to mitigate these risks.
The manufacturing company wants to expand the business in Venezuela deals with
the manufacturing of daily usable items like soaps, shampoo, conditioners, toilet cleansers
and many more which are used by common people. This company recently took the decision
to have their business extended in Venezuela (Christensen et al. 2015). However, at this time
the political environment of Venezuela is unstable. Therefore, the company needs to establish
a risk management team for identification as well as to provide a probable solution to
mitigate those risks.
The political risk management is said to be undertaken as a bad approach in the
developing countries that are thriving their foot towards growth. This type of political risks
can significantly affect or put an adverse negative impact on the growth of the country as well
as its business industries. The political risks may be well defined as the complications or

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barriers that are faced by the businesses and the government because of the changes in the
political environment of the country. The political risk can be considered in the operational
risks from the perspective of an organization (Akcaoglu, Wehner and Bolsinger 2018). These
political risks can hamper the outcomes that are expected in business and can alter the
economic action as strategized by the organization. The manufacturing company that wants
to expand the business in Venezuela will face the risk associated to the financial loss and
strategic breakdown of the company’s business. Moreover an organization can implement
many new strategies to cope with the present situation of the country.
This segment will deal with the political risk factors that can put an impact as a barrier
to the organizational goals. Barriers to any kind of risks especially political risks are very
harmful for business growth of an organization which is trying to establish the business
internationally. The first factor that can put an adverse effect in the field of expansion can be
determined as political violence (Haimes 2015). The noted political tension going throughout
Venezuela has put the company is a real thinking that what should be the procedures
undertaken by the company to deal with the current situation of the country. The company
should think about the outcomes of the decrement in the investment returns which will put an
adverse effect in the financial sector of the business.
The business factors like manufacturing of goods, its delivery as well as the
investment procedure puts negative impact on the business by some political decisions. The
decisions that government’s take can affect the industry’s overall economy and their business
(Fiksel 2015). This sectors include the spending on raw materials, the labour wages, the
regulations and laws of the labour as well as taxes and currency valuation for the company.
In this case the manufacturing company is trying to deal with the situation of the
political misbalance of Venezuela. To avoid this type of circumstances the best methodology

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is used by the management team of the company that is to insure the company about the
political risks. Therefore the company will buy the political insurance policy which will help
the company to mitigate the political risks arising in the country (Glendon and Clarke 2015).
This policy will allow the management to concentrate on the fundamentals of business
simultaneously having a report of the political risks that are to be avoided.
Since Venezuela’s situation of politics is deteriorating day by day many companies
has skipped the plan for extension of its branches in the country. There is an increase in the
poor form of the contract enforcement as well as trespassing of the private property had
become very common by the government (Oliva 2016). For this reason the investment from
the foreign investors has likely gone down in the country. The country’s political satire is so
much depressing that the trust of the foreign investors is getting hampered. The political
stability of Venezuela is getting worse from time to time which is decreasing the interests of
investors to expand their companies in Venezuela.
According to the stated figure the political risk summary of Venezuela is provided in
correspondence to the risk summary of the other countries in the world. The level of risks is