How Political Risk Analysis Helps Business to Succeed

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holder may sometimes very challenging. This joint-minister decision making means also brings along huge difficulties for companies to achieve business goals through lobbying or appealing to a seemingly managing minister. A typical scenario is that when a foreign company wants to register in China or open local branch, it has to appeal to more than five ministers in order to get the permit. Meanwhile, after its registration, it is regulated under two ministers. Being aware of all these complex political structures, a company will know exactly what they can do in such a country and from where to start.

China has been growing at a quite high rate. However, at current stage, the bubble in real estate and stock market are worrying investors both domestically and internationally. Swinging policies reviewed the fact that Chinese government has realized the increasing risk of its financial market. Any company considers to explore Chinese market must take exchange rate fluctuation and asset depreciation in foreseeable future.

As many other developing countries, many of China’s policies are frequently revised after its implementation. As mentioned in the beginning of the article, Chinese government has been making great effort to increase the welfare for bottom residence. However, doing so may also means that China is giving up one of its primary competitiveness’s. More direct influence should be taken into consideration, such as China’s super flexible tariff payback policy to all of its export oriented manufactures. All of these unstable policies can be very influential to a business considering entering this market.

Because of China’s top-downwards decision making process, there are relatively less “buffer time” for a foreign company after a new policy starts to implementation. Based on this reason, foreign investors should always consider possible policy changes into consideration before making any further decision.

A company seeking opportunity in China should also be aware that because many policies are still under research or experimenting period, it should always keep the flexibility to progress with new policies. Spending some government relationship costs maybe a effective way to achieve this goal, as long as doing so will not violate anti-corrupt regulations in both China and the company.

Last but not least important, because China’s mass media is under direct supervision of government, it is hard to build a long term relationship with domestic partners and customers without figuring out a effective yet localized way to express a company’s competitiveness.

Political risk analysis is very powerful if done thoroughly. There are many cases where economic analysis has provided great projects to a company, in a sudden can some policy destroy the entire outcome strived by company for a long period.

To include political risk analysis in the pre-implementation plan of going-abroad will greatly enrich global business exposure to a decision maker, and sometimes can even save the company from very emergent situations.