A Job for 007 Case Analysis

ABSTRACT

Political risk is a top concern for corporate foreign investors. Political risk can have a major impact (often negative) on the bottom-line of an investor however, using strategies that are often firm/industry specific/dependent, firms can mitigate against these risks. The case, “A Job for 007,” highlights political risks of firms that transport oil/gas from the Caspian Sea.

INTRODUCTION

According to a 2009 report prepared by the Multilateral Investment Guarantee Agency (MIGA), the arm of the World Bank that offers political risk insurance to investors in developing countries, “political risk is a top concern for corporate foreign investors—from industrialized but also developing countries—when venturing into emerging markets. Additionally, corporate investors surveyed for their report rank political risk amongst the top three concerns when investing in developing countries more often than any other consideration, including macroeconomic stability and access to financing (MIGA, 2009). Table is attached at Appendix 1.

KEY POINTS IN THE CASE

← The Movie “The World Is Not Enough” plot is centered on the destruction of an existing pipeline bringing oil from the Caspian Sea to Western markets

← The movie focuses on a real world problem and a perfect example of the importance of political risk analysis

← The Caspian Sea sits on a rich bed of oil and companies around the world are interested

← Baku (capital of Azerbaijan) is the center of the oil industry operating in the Caspian Sea region and is the Caspian’s main port.

← Accessing the oil is easy; however, getting it to market is another question. All of the possible transportation routes involve crossing politically unstable territory.

← The four current pipelines run cross politically unstable areas (especially the first two). Azerbaijan itself is politically risky.

← Although the situations are politically risky, the expected returns (160...