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Ten Critical Steps for Risk Managers - Essay Example

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Ten Critical Steps for Risk Managers Ten critical steps for risk managers to prevent losses The country of Mexico is exposed to political risks that affect the trade ties, imports and exports with other countries. The concerns for insurance of political risk exposure of the business has increased in such proportions that it has exceeded the rate of influx of foreign direct investments in the country…
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The ten critical steps that could be taken by the risk managers to prevent losses due to political risk in the country are explained as follows. Firstly, the risk manager should undertake a study of the Mexican markets and the situations of crisis that has been prevailing. The risk manager should undertake an analysis of the political risk in the market and monitor the volatility of the market in order to understand the implications of political risk. Secondly, the demands of the markets and the political interference should be studied in order to prepare a plan for controlling the losses.

Thirdly, the manager should engage with local public entities in order to understand the market sentiments in Mexico. Fourthly, the risk manager should hold meetings with the labor unions in order to understand the demands and expectations of the workforce. Fifth, the risk manager should be flexible enough to draw back up plans in case the primary plans fail to mitigate the risks. Sixth, the risk manager should take support from the management in order to engage with the political representatives and leaders in order to strike a deal to maintain smooth operation of the business in conditions of turbulence.

Seventh, the risk manager should propose the management to enter into strategic alliance with local business houses. This step would be crucial in order to restrict the losses due to local and political interferences. Eighth, the risk manager should undertake strategies for political risk insurance of the business in order to cover the exposure as a result of political uncertainty. Ninth, the risk manager should consider the returns in the study of risk. A higher and calculated risk could lead to attainment of higher returns for the risk manager.

Thus the risk manager should undertake an analysis of the risk-return trade off. Lastly, the risk manager should be innovative and prompt to react to the political risk exposures and then take necessary steps as there is no single tool for restricting the losses with the continuous change in the markets in a volatile situation. Recommendation: steps to begin an import / export relationship In order to begin an import/ export relationship with Mexico, the following courses of action have been recommended.

The recommended course of action not only mitigates the risk but also help to resume international trade, imports and exports with the country. The engagement in to talks and relationships with the government of Mexico may be suggested in order to force a deal of mutual interest between the Mexican government and the trader. However, the relationship ties may weaken with the passage of time and the risk manager would need to be flexible in order to restrict the losses due to political risk. The risk manager may enter into talks with the labor unions in order to negotiate terms for maintaining smooth operations of the business.

However, political risk insurance may be recommended that would enable the risk manager to build confidence of the management due to which relationship of export and import could be started with the country (MIGA, 2011). The risk manager could take necessary actions of engaging into contracts with the local bodies, export credit agencies

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