A Firm Is Evaluating Country Risk as a First Step

question 71

Essay

A firm is evaluating country risk as a first step in its outsourcing provider selection process. Legal issues, currency risk, political risk, and cultural compatibility have been assigned weights of 30%, 10%, 20%, and 40%, respectively. Three countries were scored on each of those risk factors (see table below) using a scale of 1-10, with a score of 1 meaning high risk and 10 meaning minor risk. Using the factor-rating method, which country appears to have the least risk overall?
$$\begin{array} { | l | c | c | c | } \hline & \text { Country A } & \text { Country B } & \text { Country C } \\\hline \text { Legal issues } & 2 & 6 & 10 \\\hline \text { Currency risk } & 8 & 4 & 2 \\\hline \text { Political risk } & 5 & 8 & 2 \\\hline \text { Cultural compatibility } & 3 & 1 & 2 \\\hline\end{array}$$

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Definitions:

Flexibility

The quality of being adaptable or variable in response to changing conditions or circumstances.

Stereotype Threat

The psychological experience of anxiety or concern in a situation where a person has the potential to confirm a negative stereotype about their social group.

Political Science

The systematic study of government structures, processes, and political activities and behavior.

For-profit University

An educational institution operated by private sector companies and intended to generate profit for shareholders, often offering a range of degree programs.