Question

You are the CEO of a company that has to choose between making a $100 million investment in Russia or Poland. Both investments promise the same long-run return, so your choice is driven by risk considerations. Assess the various risks of doing business in each of these nations. Which investment would you favor and why?

Answer 1

Answer:

Going by the Ease of Doing Business ranking of 2020, prepared by the World Bank, which is perhaps the most reliable ranking to assess business risk in different countries.

Russia has a higher score in the ranking, which means that doing business is less risky there. Poland has particularly high risks in the starting a business category, which means that the mere act of starting the business in Poland might be a risky decision.

Russia has a high risk in trading accross borders, probably because the country is subject to several international sanctions.

If we go only by score, Russia has a higher score, so, as the CEO, you should probably invest there. However, you should avoid investing in Russian companies that try to export abroad, because of the high risks associated with trade in that country.