Why do firm operate in high-risk countries Give specific examples Essay

Why do firm operate in high- encounter countries Give specific examples - Essay drillThe term high risk implies that a certain countrys economy has a higher inclination towards risk. This risk may exist because of any(prenominal) social and political problems that the country might face. Because of a social and political turmoil in the country, government policies regarding the foreign direct investment may non be very friendly and so may not be very attractive for the investors. Also in that respect is likelihood that the security situations in much(prenominal) countries also may affect the foreign businesses. For example many firms have suffered in countries like Pakistan and Afghanistan where the security situation does not permit a brawny business environment. The products of the firms that operate in high risk countries may not provide the value they once did, as Penn (2003) points out. Also according to Penn (2003), the overall productivity of the firms and companies mig ht fall because the revenues earned would be less than those that were earned previously. As a consequence, the costs incurred by the investors might rise too. The firms would be increasingly charge in such situations with unnecessary costs and the benefits expected may also be dwindling. Also the interest rate in the high risk countries is principally less which means that the foreign direct inflows are also gravely affected. This is true for all the foreign direct investors that operate in high risk countries. However, it is interesting to note that recently there has been a trend of companies working in the high risk countries when they actually should have found exits. Of course there might be some benefits in doing so, that encourages the investors to work in such situations. The paper discusses some of the advantages that a firm might have while invest in countries that are in state of recessions.Most of the economists like Rothgeb (1986) believe