Skip to content

ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

Brandon plc plans to build a factory in a country where governments have changed three times in four years, each reversing the previous government's rules on foreign ownership of businesses. Which risk does this MOST directly illustrate?

This illustrates political instability. Repeated changes of government and reversals of foreign ownership rules make future conditions unpredictable and threaten the security of Brandon's factory investment. The scenario gives no information on inflation, demographics or technology, so those categories do not fit.

  1. APolitical instability creating uncertainty about future rules and the security of investmentCorrect
  2. BEconomic risk from rising inflation in the host country
  3. CSocial risk from an ageing population in the host country
  4. DTechnological risk from obsolete production methods

Explanation

Frequent changes of government and policy reversals on foreign ownership create uncertainty and a risk that the investment may be restricted or taken over. Inflation, demographics and technology are not mentioned in the scenario. The key issue is instability of political policy affecting the security of the investment.

Did you get it right without looking?

One question tells you little. A timed set on Political and legal factors affecting business shows your real accuracy, how long you take and where you lose marks.

Practise Political and legal factors affecting businessFree diagnostic mock

More Political and legal factors affecting business questions