Question 1

According to the 2012 Transparency International Corruption Perceptions Index, which of the following is the least corrupt nation?

Accepted Answer

New Zealand is the least corrupt nation according to the 2012 Transparency International Corruption Perceptions Index. India, the United States, and Spain are all ranked lower on the index in terms of perceived corruption.

Question 2

In recent years _____ risk analysis has become of increasing concern to MNCs because of the growing number of countries that are finding their economies in trouble as in Southeast Asia or even worse, unable to make the transition to a market-driven economy.

Accepted Answer

In recent years, macro risk analysis has become of increasing concern to MNCs because of the growing number of countries that are finding their economies in trouble, as in Southeast Asia, or, even worse, that are unable to make the transition to a market-driven economy.

Question 3

China's decision regarding restrictions on foreign exchange transactions is a _____ political risk because it affects all MNCs.

Accepted Answer

One is through macro political risk analysis, which reviews major political decisions that are likely to affect all business conducted in the country. For example, China's decision regarding restrictions on foreign exchange transactions represents a macro political risk because it affects all MNCs.

Question 4

_____ risk issues often take forms such as industry regulation, taxes on specific types of business activity, and various restrictive local laws.

Accepted Answer

Micro risk issues often take such forms as industry regulation, taxes on specific types of business activity, and restrictive local laws. The essence of these micro risk issues is that some MNCs are treated differently from others, thus increasing the cost of doing business for some.

Question 5

Which of the following is not a challenge of doing business in Russia?

Accepted Answer

Russia is one of the most challenging countries in which to do business. Corruption, red tape, security concerns, and overall lack of faith in governmental policies result in an especially difficult political environment.

Question 6

According to the text, the following are all forms of terrorism except:

Accepted Answer

Three types of terrorism exist: classic, amateur, and religiously motivated.

Question 7

Not all MNCs are confident about international investment in countries with:

Accepted Answer

MNCs that are concerned with currency convertibility issues, political unrest, or exporting matters may want to take a closer look. Insurance terms range anywhere from 3 to 15 years or more and can cover up to $80 million per risk.

Question 8

The following are internal factors which MNCs may use to evaluate political risk except:

Accepted Answer

The other choices (A, B, and C) all relate to political risk factors that MNCs may use to evaluate a host country's political environment. However, option D - regional instabilities - is not a valid internal factor for political risk assessment. Regional instability is typically an external factor, and it relates to factors such as regional conflicts and refugee crises. MNCs may consider such external factors when evaluating political risk, but they are not internal factors that can be managed within a specific host country.

Question 9

Expropriation is more likely to occur in:

Accepted Answer

Generally, expropriation is more likely to occur in non-Western countries that are poor, relatively unstable, and suspicious of foreign multinationals.

Question 10

China's government policies regarding investment in the telecommunications industry fall into the _____ political risk category.

Accepted Answer

China's government policies regarding investment in the telecommunications industry fall into the micro political risk category.

Question 11

Broadly, ________ strategies may include leveraging bilateral, regional, and international trade and investment agreements, drawing on bilateral and multilateral financial support, and using project finance structures to separate project exposure from overall firm risk.

Accepted Answer

Broadly, [proactive political] strategies may include leveraging bilateral, regional, and international trade and investment agreements, drawing on bilateral and multilateral financial support, and using project finance structures to separate project exposure from overall firm risk.

Question 12

The seizure of businesses by a host country with little, if any, compensation to the owners is referred to as:

Accepted Answer

Expropriation is the seizure of businesses with little, if any, compensation to the owners.

Question 13

Over the past two decades, political risk has become:

Accepted Answer

For well over two decades, businesses have been looking for ways to manage their political risk.

Question 14

The following is not an example of risk factors for an MNC:

Accepted Answer

Examples of risk factors include freezing the movement of assets out of the host country, placing limits on the remittance of profits or capital, devaluing the currency, appropriating assets, and refusing to abide by the contractual terms of agreements previously signed with the MNC.

Question 15

Laws that require that nations hold a majority interest in the operation are known as:

Accepted Answer

In addition, some takeovers were caused by indigenization laws, which required that nationals hold a majority interest in the operation.

Question 16

The following is not an external factor used by MNCs for evaluating political risks:

Accepted Answer

The answer of The following is not an external factor...

Question 17

The economies of China, Russia, India, and Vietnam present _____ political risk for MNCs.

Accepted Answer

Many other newly emerging economies, besides the big countries China, Russia, and India, also present macro political risks for MNCs. In Vietnam, the communist government earned a bad name among foreign investors because of all the pitfalls they have to face.

Question 18

_____ reviews major political decisions that are likely to affect all business conducted in a particular country.

Accepted Answer

One is through macro political risk analysis, which reviews major political decisions that are likely to affect all business conducted in the country.

Question 19

According to the 2012 Transparency International Corruption Perceptions Index, which of the following is the most corrupt nation?

Accepted Answer

According to the 2012 Transparency International Corruption Perceptions Index, Somalia is ranked as the most corrupt nation with a score of 8 out of 100. It is followed by North Korea and Afghanistan. El Salvador, Columbia, and Lebanon are ranked 83, 94, and 128 respectively out of 176 countries.

Question 20

The following actions raise the political risk of doing business in China except:

Accepted Answer

One analyst noted "…Today, China's central bank announced new restrictions on foreign exchange transactions, an attempt to control the flow of convertible currency out of the country. Officially described as a crackdown on illegal transactions, the moves will effectively make it more difficult for both domestic and international companies to move money in and out of China." As was brought out in Chapter 3, industrial piracy continues to be a big problem, and the Chinese government has yet to take effective action against it. Another common complaint is the way rules and regulations are interpreted in China.

Quiz 10: Managing Political Risk, Government Relations, and Alliances