Political risk

Corporate Planning Forecast oil and gas prices Discount rates, hurdle rates Exchange rates Inflation forecast Market factors Political risk, social obligations... 

Table 10 Impact of increased (political) risk on minimum acceptable tariffs and prices...

Financial risks significantly overlap in their origins with regulatory and political risks (all of them can be caused by government policies or... 

Table 17 provides an overview of political risks. A mitigation strategy for such risks would by default involve the development and the implementation of long-term consistent policies for risk reduction, which is impossible without the participation of the governments concerned. Bilateral and multilateral instruments and other forms of cooperation are required, often with considerable input and advice from industry. 

Table 17 Political risks matrix in cross-border pipeline projects.

Erb, Harvey and Viscanta Expected Returns and Volatility in 135 Countries. The Journal of Portfolio Management, Spring 1996. Cf also by the same authors Political Risk. Economic Risk, and Financial Risk. Financial Analysts Journal, November/December 1995, and Do World Markets Still Serve as a Hedge The Journal of Investing, Fall 1995. 

Political risk which may imply termination of the construction of new pipelines, or the termination of the operation of existing main pipelines because of political instability in the region. 

To increase the reliability of main pipelines due to political risks, it is recommended to support the ... 

There is only one operating gas duct from Russia via Georgia that exhibits technical, economic and political risks. 

Global specialty chemicals companies already operate plants in many different countries and have the expertise to navigate in the respective business environments. Therefore, typically political risks are not incorporated into quantitative models but considered when selecting the potential investment candidate countries. If desired, the model can be extended to include political risk based on an aggregate risk parameter to analyze risk/return profiles for alternative network configurations. For a more detailed discussion of the major elements of political risk see Appendix 3. 

In the design of a global production network for a specific value chain additional risk stems from factors such as exchange rate exposure or political risks associated with international investments. Following the differen-... 

Political risks have to be considered both in the case of identifying potential plant locations and in the context of production network controlling. Both in academic research and in industry the Iranian revolution jump-started comprehensive discussions of the subject (cf. Brewer 1981, p. 5 ... 

Micallef 1981, p. 47 Chase et al. 1988, p. 35 Weiner 1992, p. 20). Nevertheless, according to Kobrin (1979, p. 75) political risks are rarely included explicitly into the analysis of major investment projects. 

Different approaches towards structuring the various kinds of political risks can be found in literature (e.g., Meldrum 2000, pp. 34-35 Desta 1986, pp. 50-53). As shown in Figure 57, typically, based on the impact of the respective type of political risk, one can distinguish between asset protection risks, transfer risks and operational risks (cf. Root 1972, p. 357). Additionally, a separation into macro risks affecting all foreign companies operating in a country and micro risks that are specific to the industry and/or the individual company should be made (cf. Robock 1971, pp. 9-11). 

Brewer TL (1981) Political Risk Assessment for Foreign Direct Investment Decisions Better Methods for Better Results. Columbia Journal of World Business 16 5-12... 

Butler KC, Joaquin DC (1998) A Note on Political Risk and the Required Return on Foreign Direct Investment. Journal of International Business Studies 29 599-607... 

Chase CD, Kuhle JL, Walther CH (1988) The Relevance of Political Risk in Direct Foreign Investment. Management International Review 28 31-38... 

Desta A (1986) Assessing political risk in less developed countries. Journal of Business Strategy 5 40-53... 

Feils DJ, Sabac FM (2000) The impact of political risk on the foreign direct investment decision A capital budgeting analysis. The Engineering Economist 45 129-143... 

Robock SH (1971) Political risk identification and assessment. Columbia Journal of World Business 6 6-20 Rohm and Haas (2006) Annual report 2005. 

Roodman GM, Schwarz LB (1975) Optimal and Heuristic Facility Phaseout Strategies. AIIE Transactions 7 177-184 Root FR (1972) Analyzing Political Risks in International Business. In Kapoor A, Grub PD (eds) The Multinational Enterprise in Transition. Darwin Press, Princeton, pp 354-365... 

Shapiro AC (1981) Managing Political Risk A Policy Approach. Columbia Journal of World Business 16 63-69... 

Weiner B (1992) What Executives Should Know About Political Risk. Management Review 81 19-22... 

Wets RJ-B (1989) Stochastic Programming. In Nemhauser G, Rinnooy Kan AHG, Todd MJ (eds) Optimization. North-Holland Publishing Company, Amsterdam et al., pp 573-629 Wets RJ-B (1974) Stochastic Programs with Fixed Recourse The Equivalent Deterministic Program. SIAM Review 16 309-339 Wilkin S (2000) Why Political Risk is Important to You. World Trade 13 40-44... 

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