Homework Answers
Country Risk is risk associated with investment in specific risk. country risk is arise due to various factors like, Political policies, cultural and demographic factor, avaiilability of labor. Each country has different factors that can affect the cash flowof MNC's project.
To reduce or mitigate the risk, multinational companies diversify their operation in different country. in such diversification MNCs choose country thta has favourable operation consition and tax regulation. for example, in production in such country where labor rule is relatively soft, sale in countries that have good demand and headoffice in such country thta is softer tax regulation.
By this MNCs reduce their country risk.
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