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Chapter 5: Q1DQ. (page 679)

What risks does a foreign affiliate of a multinational firm face in today's business world?

Short Answer

Expert verified

Business risks, foreign exchange risk, and political risk

Step by step solution

01

Explanation of Multinational Firm

A multinational corporation generally invests 30% of the firm's business activities in other countries or outside national borders.

02

Risks of foreign affiliate

Firstly, Foreign affiliates of multinational corporations will have business risks: realted sales, market share, competition, etc.

Foreign exchange risk refers to the risk involved due to the exchange rate of currency, as it may go up or down compared to the home country's currency price.

Political risk refers to risks that arises due to political conditions in a foreign country. These adverse political conditions related to will affect negatively to multinational corporation.

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