9. Investing overseas

Multinational corporations are exposed to higher risks that primarily come from two significant sources: (1) exchange rate risk and (2) political or country risk.

An example of _________(exchange rate risk/political risk) would be having property expropriated without adequate compensation.

Which of the following are steps a company can take to reduce potential loss from expropriation? Check all that apply.

A. Lock in the dollar return by selling currency in the forward market.

B. Structure operations so that the subsidiary is only valuable as a part of the integrated corporate system. This reduces the risk exposure for the integrated company.

C. Finance the subsidiary with local capital which reduces the local governments incentive to expropriate the multinational companys property.