Question

Magma, Inc. is a multinational firm with subsidiaries around the world. Magma has a new facility it owns and operates in Mozambique. Magma wants to reduce the firm's exposure to political risk in Mozambique. Each of the following actions would likely accomplish this goal except
Select one
A. being a good corporate citizen
B. purchasing capital equipment outright
C. reducing net investment exposure in the subsidiary
D. buying inputs from local suppliers

Answer 1

Answer:

B. purchasing capital equipment outright          

Explanation:

Option (b)  will increases the investment in Mozambique and thus increasing the political risk.  

Option (a) reduces the political risk since by being a good and just corporate citizen, they are contributing to the country.

Option (c), also reduces political risk in the country as investment exposure to the country is less.

Option (d)  leads to make relations with the local suppliers thus reducing political risk as it will increase the  power of negotiation of Magma in Mozambique.  

Hence the correct option is (b).