The Sports Exports Company produces footballs in the United States and exports them to the United Kingdom. It also has an on-going joint venture with a British firm that produces some sporting goods for a fee. The Sports Exports Company is considering the establishment of a small subsidiary in the United Kingdom.

1. Under the current conditions, is the Sports Exports Company subject to country risk? [5 Marks]

2. If the firm does decide to develop a small subsidiary in the United Kingdom, will its exposure to country risk change? If so, explain? [10 Marks