Question

Which of the following is the most direct example of political risk in Spain for a U.S.-based MNC with a subsidiary in Spain?

a) Changes in labor market regulations affecting the subsidiary
b) Fluctuations in the exchange rate between the U.S. dollar and the euro
c) Technological advancements impacting the industry
d) Changes in consumer preferences in Spain affecting product demand

Answer 1

The most direct example of political risk in Spain for a U.S.-based MNC with a subsidiary in Spain is changes in labor market regulations affecting the subsidiary.

Step-by-step explanation:

The most direct example of political risk in Spain for a U.S.-based MNC with a subsidiary in Spain would be changes in labor market regulations affecting the subsidiary (option a).

Political risk refers to the potential impact of political and governmental actions on the operations and profitability of a company. In this case, changes in labor market regulations in Spain could affect the subsidiary's ability to hire, fire, or negotiate with employees, potentially impacting the cost and efficiency of its operations.

For example, if the Spanish government introduces new regulations that increase the minimum wage or impose stricter labor standards, the subsidiary may face higher labor costs or more stringent requirements that could impact its profitability.