Terrorism and the International Business Environment

Terrorism and the International Business Environment

The Security–Business Nexus

Edited by Gabriele G.S. Suder

This book was born from the editor’s conviction that a wide set of contributors should provide the economic and corporate sectors with guidelines, developed from rigorous research and case studies, to analyse those adjustments made necessary through international terrorism, as known since September 11th 2001. It argues that corporate asset protection and accurate business risk assessment is vital to the longevity, and resilience of business.

Chapter 6: The Impact of Geopolitical Turmoil on Country Risk and Global Investment Strategy

Michel Henri Bouchet

Subjects: business and management, international business, politics and public policy, international politics, terrorism and security

Extract

Michel Henri Bouchet INTRODUCTION One of the conclusions of this chapter is that the September 11, 2001 terrorist attack coupled with the Afghan and Iraqi pre-emptive wars coincide with a major and probably long-lasting reassessment of country risk. The global terrorist threat catalyses a number of emerging risks that stem from higher and wider volatility in the global economy, including in the economic, financial and socio-political spheres. More than ever, market globalization coincides with risk globalization. September 11 and the Afghan and Iraq wars have a two-pronged impact. First, geopolitical turmoil reactivates and globalizes containment, given that terrorism replaces communism as a widespread security threat. Second, it feeds a perverse dialectic between stateless violence and enhanced security measures, both within the 30 Organization for Economic Cooperation and Development (OECD) countries and in the developing nations. In addition, the combination of mounting global terrorism, tighter banking regulations and a worldwide economic slowdown reduce market access prospects for emerging countries and increase the scope of liquidity difficulties. Foreign direct investment (FDI) flows have shrunk since their peak of 2000 and trade tensions are mounting between Europe, North America, Japan and the emerging market countries (EMCs). In the OECD, the protracted impact of the Internet bubble reinforces the negative wealth effect of the stock market decline and prospects of a housing market value correction. The Japanese banking system is in need of a thorough restructuring with a solid capital base and a sound portfolio. Japan is thus no longer a regional...

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