Question

When a U.S. company risks the loss of its assets in a foreign country due to actions by the host government in that country, this is called:

a) Exporting
b) Insourcing
c) Sovereign risk
d) Outsourcing

Answer 1

Sovereign risk is when a U.S. company risks the loss of its assets in a foreign country due to actions by the host government.

Step-by-step explanation:

When a U.S. company risks the loss of its assets in a foreign country due to actions by the host government in that country, this is called sovereign risk.

For example, if a U.S. company invests in a foreign country by building a factory, and then the host government seizes or nationalizes the factory without compensation, it would be considered sovereign risk.

Another example would be if a U.S. company operates a business in a foreign country, and then the host government imposes regulations or taxes that severely affect the company's profitability or ability to operate, it would also be considered sovereign risk.