Answer to Question #164440 in Accounting for MPENYANE

Question

What actions can South African companies take to minimize the risk of doing  business in foreign markets? As an international business manager suggest the strategies that may be used to reduce risk faced when doing business in other countries. 

Answer 1

The threats include political risk, economic risk, and cultural risk.

There are also ways in which a company can overcome some of these risk exposures.

A business may attempt to hedge some of its foreign-exchange risks by buying futures, currency forwards, or options on the currency market.

Companies also may decide to acquire political risk insurance in order to protect their equity investments and loans from specific government actions.