Asked by Romilee Benavides on Jul 04, 2024
Verified
Carmine Inc. is an American mining company operating in Keharus, a country in Eastern Europe. Recently, the government of Keharus has passed a policy that restricts foreign direct investment. Consequently, the operations of Carmine Inc. is adversely affected. Given this information, it can be said that Carmine Inc. is subjected to _____ in Keharus.
A) reputational risk
B) valuation risk
C) political risk
D) settlement risk
Political Risk
The risk of losses due to political instability or changes in government policy that can affect investment values or business operations.
Foreign Direct Investment
An investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country.
Reputational Risk
The potential of losing stakeholder trust or diminishing brand value due to negative public opinion.
- Analyze how political threats influence business operations and the methods used by these entities to mitigate these risks.
Verified Answer
TC
Tristin ClubbJul 11, 2024
Final Answer :
C
Explanation :
Carmine Inc. is subjected to political risk because the adverse effects on its operations are due to a change in government policy regarding foreign direct investment, which is a political decision.
Learning Objectives
- Analyze how political threats influence business operations and the methods used by these entities to mitigate these risks.