Political risks in relation to the international business refer to the interlinking and the complications which the businesses face along with the governmental agencies around the world. They emerge when any political activity mostly unexpected emerge or happen which tend to put any business activity in danger or derails it from the planned path. Political risk is taken into consideration by the organisations during the market analysis as they plan to make new strategies from time to time but these factors are external to them as they have no control over them . This makes political risks more harmful to them as organisations have no sya over them and face the financial and strategic loss because of any variance in the political factors not planned or expected by them before.

Political risks disrupt the general business practices as they are too dependent on them. These risks in the international business arena can be categorised in two ways which are: firm specific risks which are to a specific business or its class and the country specific risks which do not affect any particular business in general but affect the nation as a whole in terms of losing its competitive advantage, devaluation of national currency etc. This needs proper strategic planning by the companies as these risks are hard to deal with and plays a major role in the manner in which the business is run. These risks should be monitored properly from time to time to manage them effectively and to dilute their effects on the business by planning strategically in advance.

Many companies look out to other countries mainly the developing ones to find either cheap labour or abundant labour in order to lower down its costs. However the political risks involved in such economies indirectly enhance the cost structures previously planned by the companies Developing countries provide cheap resources but the political and legal factors are very flexible in such countries which prevent the companies to plan anything strategically for the future. They change from time to time as per the international political situation and many a times only to prevent the domestic industries from facing more competition. The political situation in many of the countries builds up to extract the maximum out of the foreign companies to advantage the local governments in general. Political risks can arise from the change in government policies which may result in change in the export and import policies and hurting the prospects of licences, fees or the renewal. The risk of war is always there which can have a very adverse effect on any business organisation. There are risks involved in the banning of certain product category sale or manufacturing within the country so as to give the benefit to the local business groups. FDI norms play a very integral role in the entry of any foreign player in the market and governments often play with them to their advantage and provide benefit and shelter to the domestic firms.

Businesses must constantly monitor the global environment to study the political behaviours of the different nations so as to keep an eye on them. This would help them plan the strategies accordingly for their future business plans. This helps then anticipate the changes which is essential to be accommodated in the business planning in case of any emergencies in future. Many companies do strong lobbying in order to protect their businesses from any harsh political step which may not be in their favour (Griffin and Pustay, 1985). Companies which look out to foreign markets study and plan their approach so as to enter only those markets which can give them not only competitive advantage and opportunities but also a safe and stable political environment. Many a times while planning foreign investments, they ti up with the domestic firms so as to include them in their plans which help them getting the favourable side of the government and prevents them from any harsh change in policies as domestic firms interest are also involved.

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