An increase in political risk can be managed by:
A) adjusting a foreign investment project's NPV by either reducing its expected cash flows, or by increasing the cost of capital.
B) forming joint venture with a local company.
C) purchasing insurance against the hazard of political risk.
D) All of these.

Question

Quizplus · Accepted Answer

All of these options can be used to manage political risk. Option A involves adjusting financial factors to account for political uncertainties. Option B involves partnering with a company that has a better understanding of the political climate. Option C involves transferring risk via insurance policies. All three options can help mitigate the negative impact of political risk on foreign investments.

An Increase in Political Risk Can Be Managed By