If a foreign-based firm borrows money from a host country bank as a hedge against being forced out of operation without adequate compensation, the firm is managing political risk with ________.

Question

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The foreign-based firm is managing political risk by using local debt financing, which means borrowing money from a host country bank. This can be seen as a hedge against being forced out of operation without adequate compensation, as the firm would have access to funds to help mitigate the losses incurred by political risks.

If a Foreign-Based Firm Borrows Money from a Host Country