Main types of political risks experienced by MNEs

Essay from the year 2011 in the subject Business economics - Offline Marketing and Online Marketing, grade: 1,3, University of St Andrews (School of Management), language: English, abstract: Identify the main types of political risk encountered by

multinational corporations and discuss how these risks can be

minimized.

Introduction

The controversy between the Kazak government and the Italian oil

company ENI about the exploitation of Kashagan¿s oil fields is only one out of many cases, in which political violence acts or governmental decisions threatened foreign investments of a multinational enterprise (MNE). In April 2006, the Dacion and Jusepin oil fields, operated by ENI and the French company Total, were taken over by the Venezuelan government, because they rejected to change their business operations into joint ventures with the state-owned oil company PDVSA (Ferrari and Rolfini 2008).

Stated by Kesternich and Schnitzer (2009) some recent empirical studies identified that for MNEs political risk is one of the most important factors when considering a foreign investment. Foreign investments nowadays seem to be even more risky in terms of pollution that result in natural catastrophes such as caused by BP (Heller 2011), cultural conflicts or political disturbances for which Lybia (Yang 2011) represents a recent example and an increasing social disparity (Bloch, Koepplinger and Wolfrum 2007)

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