Question

Harmon Clothing has a production facility located in Venezuela. Recently, Harmon has been unable to arrange for overseas loans due to the burdensome regulatory policies of the Venezuelan government. Which type of political risk is Harmon most likely experiencing?A) catastrophic
B) distributive
C) procedural
D) systemic

Answer 1

Answer: D. Systemic Risk

Explanation: Systemic risks has to do with changes in government policies. It is the possibility that a situation (change in government policies) might causes or hinder economic or company growth. In Nigeria, the government increased the minimum wage of employees from 18,000 to 30,000, this increment in salary of workers meant companies will spend more on workers salaries, this changes by the government will definitely affect companies in all sectors and might even cause some companies to crumble. So what Harmon clothing is experiencing is a systemic political risk as the policies by the Venezuelan government is making it hard for them to access loans from over seas there by hindering their company growth.

Answer 2

Answer: D. Systematic

Explanation: Harmon clothing is likely experiencing a systematic political risk. A systematic political risk can be explained as the political events, decision or regulations which can negatively affect the growth or survival of a business or investment in a particular country. Systematic political risks may affect all segments of a country's market or it might be targeted towards a particular sector or market segment. Systematic political risk may stem from wholesale change in policies and regulation of the host government due to change of power or shift in major economic decisions or protocol.