Which of the following situations is an example of country risk?
A) Fiesta Corp. is an automobile manufacturer based in the U.S. The company's negotiation attempts with China to open a manufacturing factory in Beijing failed owing to cultural differences.
B) Frostees Inc. is a food and beverages company based in the U.S. Its attempt to set up an outlet in Thailand failed primarily owing to a misinterpretation of the memorandum of understanding by a potential business partner in Thailand.
C) Alpha Corp., a rice manufacturer based in Pakistan, suffered losses when the U.S. Department of Commerce decided to impose tariffs on the import of paddy rice to avoid competition for the domestic industry.
D) Tamiaz LLC is a U.S.-based manufacturer of clothing with outlets in China, Vietnam, and India. The company incurred a loss due to delayed payments from India owing to fluctuations in the currency exchange rates.

Question

Quizplus · Accepted Answer

Country risk involves the possibility that a country's political, legal, or economic environment will adversely affect a company's operations or profitability. In choice C, the imposition of tariffs by the U.S. government is a direct government action that affects Alpha Corp.'s ability to sell its products in the U.S. market, making it an example of country risk.

Which of the Following Situations Is an Example of Country