Recap Quiz 7: Managing Political Risk And Government Relations

Front 1

Political risk is the likelihood that a multinational corporation's foreign investment will be
constrained by a host government's policies.

Back 1

True

Front 2

Micro political risk analysis is directed toward government policies and actions that influence
selected sectors of the economy or specific foreign businesses.

Back 2

True

Front 3

China's decision regarding restrictions on foreign exchange transactions is a micro political risk
because it affects all MNCs.

Back 3

False

Front 4

Firms that are at the greatest risk in regard to expropriation are in extractive, agricultural or
infrastructural industries such as utilities and transportation because of the importance of these
industries to the country.

Back 4

True

Front 5

Protective and defensive techniques are designed to encourage the host government to actively
participate in the management of the MNC.

Back 5

False

Front 6

Which of the following is not a challenge of doing business in Russia?
A. Corruption
B. Red tape
C. Strong faith in government policies
D. Security concerns

Back 6

C

Front 7

The following actions raise the political risk of doing business in China except:
A. Interpretation of rules and regulations by officials
B. Industrial piracy
C. Pressure on the MNCs to do things in a particular way
D. Concerns on safety and reliability of product quality

Back 7

D

Front 8

According to the latest Transparency International Corruption Perceptions Index, which of the
following is the least corrupt nation?
A. India
B. United States
C. Spain
D. New Zealand

Back 8

D

Front 9

The seizure of businesses by a host country with little, if any, compensation to the owners is
referred to as:
A. Nationalization
B. Expropriation
C. Dispossession
D. Removal

Back 9

B

Front 10

Expropriation is more likely to occur in:
A. Non-Western governments that are poor, relatively unstable and suspicious of foreign
multinationals
B. Western governments that are rich, relatively stable and are experienced in dealing with foreign
multinationals
C. Non-Western governments that are neither rich nor poor, relatively stable and are unsure about the
presence of foreign multinationals
D. Western governments that are moderately wealthy, relatively stable and are new at dealing with
foreign multinationals

Back 10

A

Front 11

Tariffs on exports and imports, restrictions on exports, dividend remittance and capital repatriation
are examples of:
A. Transfer risks
B. Expropriation risks
C. Operational risks
D. Exchange risks

Back 11

A

Front 12

Price controls, financing restrictions, export commitments, taxes and local-sourcing requirements
are examples of:
A. Ownership-control risks
B. Operational risks
C. Transfer risks
D. Functional risks

Back 12

B

Front 13

_____ investments include the production of raw materials or intermediate goods that are to be
processed into final products.
A. Vertical
B. Matrix
C. Conglomerate
D. Horizontal

Back 13

A

Front 14

_____ investments run the risk of being taken over by the host-country government because they
are export-oriented and governments like a business that helps it to generate foreign capital.
A. Conglomerate
B. Vertical
C. Horizontal
D. Lateral

Back 14

B

Front 15

The theory behind _____ is quite simple. The MNC works to maintain a stronger bargaining
power position than that of the host country.
A. Analogous negotiating power
B. Pertinent bargaining power
C. Proportionate negotiating power
D. Relative bargaining power

Back 15

D