Business Risk

In a commentary in Investor’s Business Daily, Glenn Yago, Director of Capital Studies at the Milken Institute, and Joel Kurtzman of the Kurtzman Group say that companies are focused on the wrong risks today. An excerpt:

“Since 9/11, an industry of political risk consultants has grown up to help companies decide in which countries to invest. With $53 billion a year going into China, and billions more going to India and other developing countries, the consultants have their work cut out for them.

“For the most part, these firms are staffed with retired Foreign Service officers, academics and ex-intelligence analysts. When they talk risks, they are really talking political risks – revolutions, nationalizations and major acts of terrorism. These are not the risks companies face.
“Contrast political risks with the ones businesses really face – poor market and banking regulation, corruption and inadequate accounting practices. Add to that bad economic policy, fuzzy rules regarding property rights and laws that are on a country’s books but inequitably enforced. These risks may not be dramatic or big, but they are costly, everyday occurrences.”

More here.