ACCA Strategic Professional · Advanced Financial Management · International investment and financing decisions
A UK multinational plans a subsidiary in a foreign country. The host government may restrict the subsidiary's ability to pay dividends to the parent, but ownership is unaffected. Which type of risk does this describe?
This is blocked remittance or funds repatriation risk. The host government limits the cash the subsidiary can send to the parent while the parent still owns the subsidiary. Expropriation would involve seizing ownership, and translation and transaction risks relate to exchange rate movements rather than government controls.
- ABlocked remittance (funds repatriation) riskCorrect
- BExpropriation risk
- CTranslation risk
- DTransaction risk
Explanation
Restrictions on moving cash out of a host country while ownership remains intact are blocked remittances, a form of political risk. Expropriation involves loss of ownership or control. Translation and transaction risks are currency exposures, not government restrictions.
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