Risk in international business and its mitigation

Abstract

While risk mitigation and management preparedness of MNEs have escalated to the top of the corporate agenda, international business literature is lacking pertinent conceptual and empirical studies. As an opener to this special issue, we offer several perspectives on country risk and its mitigation. We discuss conceptual and empirical challenges in researching risk in international business. We conclude with a commentary on the six papers included in this special issue on international business risk.

Exploring Probabilistic Network‐Based Modeling of Multidimensional Factors Associated with Country Risk

“…Global competition has forced companies to expand their businesses to unfamiliar markets necessitating the management of uncertainty associated with such markets. Managers involved in making key strategic decisions about outsourcing and globalizing operations frequently rely on country risk ratings (Cavusgil et al., 2020; Oetzel, Bettis, & Zenner, 2001). Besides understanding the current risk of potential markets, managers are also interested in predicting the future outlook of economic and financial landscape (Eaton, Gersovitz, & Stiglitz, 1986; Tang & Buckley, 2020).…”

“…“The goal of country risk measures is to forecast political or economic events in a country that may affect the business climate in such a way that investors will lose money or not make as much money as they expected when the investment was made” (Oetzel et al., 2001). In the literature, it appears that country risk is a result of political, economic, and financial factors (Cavusgil et al., 2020), and various terms such as country risk ratings, country risk assessments, and country risk measures are used interchangeably (Brown, Cavusgil, & Lord, 2015; Cavusgil et al., 2020).…”

“…Country risk assessment poses a major challenge due to the complex nature of interactions associated with various macroeconomic, social, political, and financial indicators (Doumpos & Zopounidis, 2001). Country risk directly influences reallocation of resources, cost distortions, supply shifts, and deviations in expected performance for international firms (Cavusgil et al., 2020). With the growing need of globalizing operations, firms need to adopt a robust approach for assessing and managing country risk (Brown et al., 2015; Cavusgil et al., 2020).…”

“…Country risk directly influences reallocation of resources, cost distortions, supply shifts, and deviations in expected performance for international firms (Cavusgil et al., 2020). With the growing need of globalizing operations, firms need to adopt a robust approach for assessing and managing country risk (Brown et al., 2015; Cavusgil et al., 2020).…”

“…As “… separating the components of country risk into distinct and non‐overlapping formal statements within a precise scope is a formidable task” (Cavusgil et al., 2020), the main motivation of this study is to explore the interdependency modeling of multidimensional factors associated with country risk. In particular, we pursue two objectives.…”