ABSTRACT
The management of political risk has recently emerged as an important issue in its own right. The subject of political risk management may be of assistance to corporate decision-makers who strive to formulate and implement alternative corporate responses based on the political environment the enterprise is likely to encounter. The management of political risk includes the identification, analysis, and assessment of the risk as well as the responses formulated by the corporation on the basis of that assessment. A crucial reason for a firm’s undertaking an internal audit of its overseas exposure to political risk is to adopt a strategy to cope with that risk. The traditional tools of risk management fall into the following six general categories: avoidance, transfer, diversification, loss prevention, insurance and retention. As American and European ultinational enterprises have expanded their investments in Third World countries, corporate executives have become increasingly involved in negotiations with foreign government officials.
