Companies today must thoroughly evaluate several specific items prior to expanding into new countries; the most important of these items being political risk and the risk caused by the country’s government’s actions. More specifically, this is the evaluation of actions which the government could take that could slow, hurt or completely crush an expanding company in that country. The actions which are most risky for an expanding company are expropriation, embargo, confiscation, protective tariffs and currency controls. Of the actions a foreign country’s government could take, confiscation and expropriation are the actions which most concern expanding companies. When a government acts by confiscation, it seizes all of the company’s assets, including operations within that country, without any compensation. Ultimately, confiscation is the worst case scenario a company could face when expanding to a foreign country. However, confiscation usually only occurs to companies whom are mining or gathering the natural resources of that country, so companies which are not in the business of natural resources are less likely to be affected by this action. Closely related to confiscation is expropriation; the country still confiscates the company’s assets and operations, but makes a payment to the company (most usually well below market value). This action typically happens to financial institutions more than any other type of company. Moving past confiscation and expropriation, the actions get less severe, but can still affect a company’s profitability and range of operations. If a company can expect not to have to deal with confiscation and expropriation, it can look to whether there are any embargos involving the country or if there are any foreseeable embargos for the future. Embargos can severely limit the operations of a company if its intended market is that of the embargoed country (absolutely no trades would be allowed, sometimes not even through intermediary countries if any operation is in the embargoed/embargoing country). As confiscation was closely related to expropriation, embargos are related to protective tariffs, which while not stopping all trade can still discourage trade. With protective tariffs, a company may be looking at paying more for exports/imports it makes in a foreign country depending on its local market and the tariff policies in both the foreign country and the intended market country. Evaluating a country which could have such limitations on trade or may be limited by the intended market country through trade is key to successful expansion and mitigating risk caused by governments. Finally, the last of the severe actions which can be taken by governments, though less frequent are currency controls. An expanding company must consider the risk of a foreign country with such controls or which might create such controls, as these controls could stifle profitability or even crumble all operations within the foreign country. Currency controls can be problematic because they often represent an overvalued currency. If currency holders in that country feel the government will revalue the currency (to its appropriate level – a depreciation), then it possibly causes capital flight, in which all currency holders exchange their local currency for that of another country and move it out of the currency controlled country. This can cripple the countries whole economy and hit every company, no matter its industry. It is extremely important for expanding companies to evaluate all risks which can come to fruition due to government actions. If these companies do not evaluate these risks, they may enter themselves into a country which seizes all of their operations and assets, doesn’t allow profitable trade (or trade at all) or is possibly very unstable economically.