Risk Management Strategies in International Business
There is wide literature in international business which looks at a diverse array of risks that firms need to take into consideration when engaging in foreign activities. It mainly explains the longevity of firms, and places particular emphasis on political and financial risks, and exit options. However, there is a much broader spectrum of risks that multinationals have to face when engaged in international business. Firms may face multiple risks rather than a single risk as often assumed. This is particularly true for multinationals with complex global supply chains, with production operations spread across various parts of the world. This paper advances the analysis of risk management by extending the set of strategies to include prevention and mitigation as well as withdrawal. It challenges conventional wisdom that firms should avoid risky environments altogether or rely on low-commitment modes of entry. The paper is illustrated with a range of contemporary and historical cases of the management of risk in international business.
The Business History Seminar has been made possible by financial support from the Erasmus Research Institute of Management (ERIM) and the Erasmus School of History, Culture and Communication.