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Show THE UNIVERSITY OF UTAH HONORS PROGRAM Qualitative Risk Factors of Foreign Direct Investment (FDI): An Exercise in Discovery, Mitigation and Analysis Michael James Thornton (Karl V. Lins) Department of Finance University of Utah As business continues to shift towards internationalization it is important to understand and know how to assess the many risks associated with investing directly in foreign countries, known as foreign direct investment (FDI). First, one must be able to understand the investment strategy and build an appropriate investment thesis by asking the questions: who is the investor, what type of investment will be made, why invest abroad, where and when to invest, and how to invest? These questions direct the investor towards the most important strategic issues and help him/her to focus on risk analysis. Risk analysis is the analysis of risk factors like trade, government, culture, and international finance. Using a framework is very helpful in ensuring complete, and consistent analysis and many frameworks exist which touch on the broad issues of risk. I chose the C.A.G.E. framework (cultural, administrative, geographical, and economical risks), developed by Harvard Business School Professor Pankaj Ghemawat, because of its completeness, functionality, and ease of use. My thesis project is an attempt to explain, with deep literary research, the above mentioned risk analysis procedure, including a list of data sources for analysis, case studies, and mitigation strategies for foreign direct investing. The project also discusses issues that might not be obvious at first glance, including: entrepreneurs in respect to religion and the protestant work ethic, the advantages of bribery, and more. I have drawn from not only published works, but also the knowledge of several professors from across the country in varying fields from international business to political science, through interviews and correspondence. Michael James Thornton Karl V. Lins 136 |