Political, legal and regulatory risks
Political risks involve the effect that the political stability of the country has on the businesses present in the country. This are results from the political development from integration of various macro-environmental, as well as chance. South Africa having passed through some gruesome political turbulences, managed the situations and therefore the risks are minimized. Legal and regulatory risks emerge from the regulations that have been put in place to protect the industries from each other, protect consumers and the interests of the government and the society. Unrestrained business behaviors may be extreme and have deep cutting effects. South Africa has some regulations that also include regulations on employees. As a middle world country, the country’s policies change with time and the predictability in soma cases not very possible (Standard and Poor’s, 2006).
Exchange and repatriation of funds risks
Repatriation of funds in the case of this company will entail engaging in business in South Africa and sending back the profits made to the mother country. Though it may look simple, the transaction is not easy. Regulations that regulate such will pose a threat to the business. Whereas fiscal and financial pressures affect the foreign exchange market, it poses a great risk to companies since the rise and fall of the value of the South African Rand will have effects on the price of any asset that the company might want to acquire from the international market or even sell. Nonetheless, the transfer of the profits or money to another country is also at risk. Coca Cola has to study the changes in the foreign exchange market or chances got (Standard and Poor’s, 2006).
Competitive risk management
Competing businesses face risks due to themselves. It therefore requires the existing or any entity willing to enter the market to conduct an evaluation of whether the business will be tolerant to the competition posed by the other players. Ultimately, the goal of managing the competitive risk is to make sure that the business retains its market share and possible increment of the same. Business success relies on this largely. In South Africa, Coca Cola will rely on aggregated comparison indices regional or industrial reports regularly provided by specialized service firms that will help in decision-making and new strategy making in the country (Gallati, 2003).
Taxation and double taxation risks
High taxes and double taxations are a great blow to the residents of the country and more so the investors. It greatly discourages foreign investments in the country due to the reduction of the profits accrued by the business. South Africa in the recent past, made taxation treaties with various counties like the United States of America and the United Kingdom among others. This is in favor of the Coca Cola Company that repatriates its profits to the headquarters in the United States. This means that the risk of double taxation has been eliminated (Advanced Tax Practitioners, 2008).
Market risks
Assets and liabilities carry their own risks. The risks are called market risks. Depending on the economic situation of the industry, country or the entire globe, the valued prices of the assets vary. This puts the Coca Cola Company at a risk in which most of the factors that affect the situation are beyond its control. That is, they are external factors. Many of the factors in this case are unpredictable; they however include factors such as inflation rates in South Africa, strikes in the industry and the country and natural calamities such as floods (Gallati, 2003).
REFERENCES
Advanced Tax Practitioners. (2008). Tax: Double taxation agreements. Retrieved on 19th July 2010 < http://www.tax.co.za/a.php?a=106/Double-taxation-agreements>
Gallati, R. R. (2003). Risk management and capital adequacy. Columbus, OH: McGraw-Hill Professional.
Standard and Poor’s. (2006). Structured finance: Weighing Country Risk in Our Criteria for Asset-Backed Securities. Retrieved on 19th July 2010 <http://www.securitization.net/pdf/sp/CountryRisk_11Apr06.pdf>
