Identify major risks in international strategy and common mitigation approaches.

• A. Political risk, exchange rate, regulatory divergence, cultural distance; mitigations include hedging, local partnerships, adaptation, and risk assessment.
• B. Only currency risk matters.
• C. Risks are negligible in international strategy.
• D. Mitigations include ignoring local rules.

Answer: (A)

When expanding internationally, the big risks come from political risk, exchange rate volatility, regulatory divergence, and cultural distance. Political risk covers government instability, policy shifts, or expropriation that can disrupt operations or threaten profitability. Exchange rate risk affects margins when revenues and costs are in different currencies, so using hedging tools helps stabilize cash flows. Regulatory divergence means different countries have varying rules and standards, which increases compliance costs and timing challenges; addressing this often involves risk assessment and adapting operations or products to local requirements, sometimes through local partnerships. Cultural distance refers to differences in consumer behavior and business practices; adaptation—tailoring products, marketing, and operations to local norms—helps bridge that gap. Ongoing risk assessment ties it together by identifying and monitoring these risks so you can respond promptly.

This answer best reflects the real landscape of international strategy risks and practical ways to mitigate them. Focusing only on currency risk misses other critical threats; claiming risks are negligible overlooks real challenges; and suggesting to ignore local rules would create severe consequences.