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    The Hidden Risks in Emerging Markets - VBG

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    vbgrocks
    The document discusses the hidden political risks that companies face when investing in emerging markets. Governments in developing countries now divert profits through regulation instead of outright seizing foreign investments. This costs companies an equivalent to at least a 33% increase in tax. Traditional risk management tools are also ineffective. The document recommends that companies develop proactive political management strategies to lessen incentives for governments to divert returns, such as investing in goodwill, framing debates, and finding pressure points on local decision makers. Political skill can become a competitive advantage and prevent losses. However, in some high-risk political environments, the risks may be too great to justify entry.

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    The Hidden Risks in Emerging Markets - VBG

    Uploaded by

    vbgrocks
    115 views1 page
    The document discusses the hidden political risks that companies face when investing in emerging markets. Governments in developing countries now divert profits through regulation instead of outright seizing foreign investments. This costs companies an equivalent to at least a 33% increase in tax. Traditional risk management tools are also ineffective. The document recommends that companies develop proactive political management strategies to lessen incentives for governments to divert returns, such as investing in goodwill, framing debates, and finding pressure points on local decision makers. Political skill can become a competitive advantage and prevent losses. However, in some high-risk political environments, the risks may be too great to justify entry.

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    The Hidden Risks in Emerging Markets_vbg

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    The document discusses the hidden political risks that companies face when investing in emerging markets. Governments in developing countries now divert profits through regulation instead of outright seizing foreign investments. This costs companies an equivalent to at least a 33% increase in tax. Traditional risk management tools are also ineffective. The document recommends that companies develop proactive political management strategies to lessen incentives for governments to divert returns, such as investing in goodwill, framing debates, and finding pressure points on local decision makers. Political skill can become a competitive advantage and prevent losses. However, in some high-risk political environments, the risks may be too great to justify entry.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    115 views1 page

    The Hidden Risks in Emerging Markets - VBG

    Uploaded by

    vbgrocks
    The document discusses the hidden political risks that companies face when investing in emerging markets. Governments in developing countries now divert profits through regulation instead of outright seizing foreign investments. This costs companies an equivalent to at least a 33% increase in tax. Traditional risk management tools are also ineffective. The document recommends that companies develop proactive political management strategies to lessen incentives for governments to divert returns, such as investing in goodwill, framing debates, and finding pressure points on local decision makers. Political skill can become a competitive advantage and prevent losses. However, in some high-risk political environments, the risks may be too great to justify entry.

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    THE HIDDEN RISKS IN EMERGING MARKETS: (HBR case)

    Submitted by: Group 3-Sec A


    The case discusses about the risks involved with emerging markets and how through the use of new tools based on modern communications technology, social networking, and game theory, you can help prevent foreign governments from regulating away your profits. Governments in developing countries no longer seize foreign investments. Instead they nd ways to divert the prots through regulation or selective lack of regulation. The costs are estimated to be equivalent to at least a 33% increase in tax. Most of the traditional ways to limit risk to your companys foreign investments are not very eective anymore. You now have to learn how to play politics directly. As companies such as the Italian oil giant ENI have demonstrated, managing political risk involves balancing operational eciency with political capital, mastering the art of political spin, and hitting the pressure points of local decision makers. That means mastering new analytic skills and tools. Unfortunately, the traditional financial and contractual mechanisms that firms use to assess and mitigate business risks have limited value. Therefore, investors must develop proactive political management strategies that lessen government officials incentives to divert investors returns. Political mastery can become a source of competitive advantage and a means of avoiding losses. The author further suggests a The New Risk-Management Playbook, which constitutes of Investing in goodwill, framing the debate, finding political pressure points. The author also suggests that Instead of engaging in PR campaigns that amount to little more than advertisements for the brand, companies need to master the art of political spin. The risks of investment may simply be too great to justify entry into certain political zones. But in many cases investors who explicitly recognize the dynamism of the environment and implement appropriate strategies to address it will i nd the risks quite manageable.

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