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by Christy Okezie

MANAGING POLITICAL RISK, GOVERNMENT RELATIONS, AND ALLIANCESBYOBIOMA OLUEBUBE MIRACLEADEYANJU TEMITOPE OMOLOLAOGBU UCHECHUKWUFirms go international to become more competitive and profitable. Unfortunately, many risks accompany internationalization. One of the biggest risks emerges from thepolitical situation of the countries in which the MNC does business. Terrorism is also a worldwide concern which can create a large barrier to MNC entry or survival in acountry. MNCs must be able to assess political risk and conduct skillful negotiations.

CASE STUDYIKEAS RUSSIAN ROULETTE-MAKING A CASE FOR CORRUPTION IN RUSSIA

Applied to international management, political risk is the unanticipatedlikelihood that an MNCs foreign investment will be constrained by a host governmentspolicies. Since the terrorist attacks of 9/11, political risk assessment has becomeespecially vital to MNCs. TAKE CHINA FOR INSTANCE:

MACRO AND MICRO ANALYSIS OF POLITICAL RISK

macro political riskanalysis, which reviews major political decisions that are likely to affect all business conductedin the country.micro political risk analysis, which is directed toward government policiesand actions that influence selected sectors of the economy or specific foreign businessesMACRO RISK ISSUES AND EXAMPLES

Select Countries in the 2009 Transparency InternationalCorruption Perceptions Index (Note: Some countries are tied)Rank Country/Territory1 New Zealand2 Denmark3 Singapore8 Canada12 Hong Kong12 Luxembourg14 Germany17 Japan17 United Kingdom19 United States25 Chile32 Israel32 Spain39 Oman39 Korea (South)49 Poland55 South Africa63 Italy63 Saudi Arabia79 China84 IndiaRank Country/Territory84 Thailand89 Mexico89 Rwanda111 Egypt111 Indonesia120 Vietnam139 Pakistan139 Philippines146 Russia146 UkraineSource: Transparency International, http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table.Terrorism and Its Overseas ExpansionTerrorism has existed for centuries, but terrorism has become more of a concern everywhereover the last few years, and especially so in the United States in light of the September11, 2001, attacks. Terrorism is the use of force or violence against others to promotepolitical or social views. The ultimate goal of the violence is for government and citizensto change policies and ultimately yield to the beliefs of the terrorist group. Three typesof terrorism exist: classic, amateur, and religiously motivated. Classic terrorism entails aspecific, well-defined objective pursued by well-trained, professional, underground members.Amateur terrorism tends to occur once and often has poorly defined objectives, andtherefore members are not as committed. Religiously motivated terrorism is carried out byindividuals holding very strong core beliefs, regardless of how well defined their objectivesare. The latter tends to be more chaotic and scattered, since the individuals involved areextremely passionate about the cause, despite the lack of unified goals.Analyzing the Expropriation RiskExpropriation is the seizure of businesses with little, if any, compensation to the owners.Such seizures of foreign enterprises by developing countries were quite common inthe old days. In addition, some takeovers were caused by indigenization laws, whichrequired that nationals hold a majority interest in the operation. Generally, expropriationis more likely to occur in non-Western countries that are poor, relatively unstable, andsuspicious of foreign multinationals.LOCAL CONTENT ACTThe Local Content Bill was been enshrined into Nigerian Law on the 22nd of April 2010. This act sets out specific work scopes that must be performed in Nigeria and it guarantees fair access to foreign companies. The Act seeks to increase indigenous participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials and to promote the employment of Nigerian staff in the industry.It provides privileges for indigenous companies by making sure there is first consideration for the training and employment of Nigerians and it sets out the criteria to be used by the operator and the contractor in assessing how first consideration is to be given to Nigerians in the process of evaluating bids for goods and services required for projects. This act directly affects operating companies, contractors, sub contractors and service providers in the oil and gas industries. In addition, the Act also affects, professional services engagements including legal and financial services in the oil and gas sectors of Nigeria.

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