Page 13 - eBook: EXIM for Beginner

i) Political environment

There are 4 main effects of these political factors on
business organizations. They are:

Impact on economy: A country's political situation
has an impact on its economic situation. The state

of the economy has an impact on business

performance.

Changes in regulation: Governments have the

ability to change their rules and regulations. This
could have an impact on a company.

Political stability: A country's lack of political

stability has an impact on business operations. This
is especially true for companies that operate on a

global scale.

Mitigation of risk: Political risk can be managed by
purchasing political risk insurance. Companies with

overseas operations utilise this type of insurance to
mitigate risk.