Which of the statements below is FALSE?

Select the correct answer

1. Political risk involves changes in a foreign government. At one extreme is the case in which a local government "takes over" the assets of the company and nationalizes it.
2. Political risk involves changes in a foreign government. An extreme example is the case in which a government encourages foreign investment and gives breaks to companies willing to move operations locally.
3. There are three basic defensive mechanisms that can guard against the extreme case of nationalized assets. These include keeping critical operations private, financing operations and assets with local money, and receiving primary inputs outside the local economy.
4. One way that a multinational firm can minimize the potential of nationalization of assets by a foreign government is to share key elements of operations with the government.