Explain how the expropriation of property is a risk for companies engaged in international business

What will be an ideal response?

Expropriation, the taking of private property by a host-country government for either political or economic reasons, is one of the greatest risks companies take when they engage in international business. Thus, it is essential for business managers to investigate the recent behavior of host-country government officials, particularly in countries that are moving from a centrally-planned economy toward one that is market-oriented (for example, Russia and Eastern European nations). One method of limiting risk in politically unstable countries is to concentrate on exports and imports (trade) and licensing and franchising. Another method is to take advantage of the low-cost insurance against expropriation offered by the Overseas Private Investment Corporation (OPIC). If a U.S. plant or other project is insured by OPIC and is expropriated, the U.S. firm receives compensation in return for assigning to OPIC the firm's claim against the host-country government. Bilateral investment treaties (BITs), which are negotiated between two governments, obligate the host government to extend fair and nondiscriminatory treatment to investors from the other country. A BIT normally also includes a promise of prompt, adequate, and effective compensation in the event of expropriation or nationalization.