Question

Expropriation is considered a major risk of foreign business. Discuss in your own words ways in which this particular type of risk has been minimized somewhat as a result of company activities. Explain the strategies or approaches used to mitigate expropriation risk.

Answer 1

Companies can mitigate the risk of expropriation through strategies such as political risk insurance, building relationships with local governments, and diversifying their investments.

Step-by-step explanation:

Expropriation is a major risk for foreign businesses. However, there are strategies and approaches that companies can use to mitigate this risk to some extent. One way is through political risk insurance, which provides financial protection in case of expropriation. Companies can also establish strong relationships with local governments and stakeholders, investing in social and economic development in the host country. Another approach is diversification, spreading investments across different countries to reduce the impact of expropriation in any single location.