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One factor of business risk that is outside of the firm’s control is political risk. Political risk can range from insignificant to severe across different countries, but can also vary at different times. While firms cannot directly control political risk, understanding it is an important part of evaluating a company’s overall strategic framework.
Considering this please address the following prompts in your discussion:
Analyze the political risk in (Mexico). How will this political risk affect your area of business (IT industry)?
Mexico has a large amount of political risk when it comes to the IT industry. Mexico is still emerging as an IT hub in Latin America, which means that there are not a lot of regulations or legal protections for companies operating in the country. This exposes firms to potential corruption and other unethical practices by government officials and local businesses. Additionally, since Mexico is a signatory to numerous free trade agreements (such as NAFTA), any changes in these agreements could have a major impact on Mexican IT firms who rely heavily on exports. Finally, there is also the risk of economic instability due to low oil revenues and high inflation rates, both of which can lead to challenges for investors looking for stability in the long run.
In terms of how this political risk will affect business operations within the IT industry, companies need to be aware that they need to operate according to all applicable laws and regulations at all times so as not to be exposed should something go wrong or become illegal without warning. Companies must also monitor changing economic conditions closely so that they can adjust their strategies accordingly. They must also be prepared for unexpected delays in government processes such as obtaining licenses or permits, getting contracts approved by authorities, etc., which may cause disruptions in their normal operations. Lastly, companies should make sure they understand any potential implications associated with free trade agreements before signing them into effect so they do not find themselves caught up in disputes between countries if something goes awry during negotiations/implementation phases.