Global Operations Management

Essay by joneskUniversity, Master'sA+, October 2004

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By the definition in the dictionary, risk is "the possibility of suffering harm or loss" (American heritage dictionary 2004). Risk Analysis is "a procedure to identify threats and vulnerabilities, analyze them to ascertain the exposures, and highlight ways in which the impact can be eliminated or reduced" (Disaster Recovery World 2002). One of the benefits of risk analysis is that an organization can prevent and deal with the potential loss in order to enhance the success of the investment. In this paper, we are going to assess different risks which we may face and affect our decision on investing our business in Italy, which are political, exchange and repatriation of fund, economic, financial, social/ cultural risks.

Political Risk

Italy's political situation is more stable currently than at the time when the Christian Democratic (DC) party dominated the Italian government in 1945. There had been frequent turnovers in the Italian political history.

Italian voters requested "political, economic and ethical reforms" from 1992 to 1997 because they could not tolerate a government with huge debt, serious corruption and organized crimes (The Bureau of Public Affairs 2004). Currently, there are only two major parties which are the right-of-centre Casa delle Liberta led by Silvio Berlusconi and the centre-left Ulivo, which was led by Romano Prodi. However, the Economist Intelligence Unit forecasts that the divisions of the right-of-centre party will lead the party to be defeated in the European Parliament and local elections. A government crisis will be expected. Although government turnovers are high in Italy, political risk does not influence our product to enter the Italian market because Italy is one of the member states in European Union (EU). Italy has to conform to the agreement that was signed by other members. If Italian government requests any changes in the business regulations,