The Intelligence Approach to the Management of Corporate Intelligence: The Pragmatic Concerns of Terrorism
Robert J. Kühne
Multinational companies doing business in the international arena are exposed to a variety of political risks, all affecting the profitability of the businesses. Examples of political risks companies face include expropriation or nationalization, currency devaluation or inconvertibility, involuntary divestiture, revolutions, coups d'état or civil disorder, export or import embargoes, and political terrorism. An evaluation of the experiences of companies with political risk over the last two decades indicates that the more successful the international expansion of the company, the higher the degree of political risk encountered. The success of the multinational, with the congruent high visibility and importance in a foreign country's economy, is often seen as a threat to the total economy or may easily be turned into the scapegoat for total social or economic problems.
The political risks companies are exposed to are not new or limited to certain parts of the world. As a result, management should plan for and anticipate these risks and adopt corporate policies and strategies to minimize the exposure. Multinationals with a high degree of local ownership but not contributing as much as before to the local economy or companies that negotiated unusually favorable arrangements are especially prone to changes in their business conditions. Under expropriation the host country forces the company to give up assets and operations for which the company receives compensation (often below the actual value) from the host country. Whereas expropriation may be limited to one company, nationalization refers to the taking of all corporate activities in a specific industry. It is often assumed that this type of political risk is limited to less developed