FGT is evaluating the political risks associated with its operations around the world.
Which of the following would indicate that a particular subsidiary has a high level of political risk?

• A. Forthcoming elections in the subsidiary's host country.
• B. The subsidiary employs a large number of nationals from the host country.
• C. Company law in the subsidiary host country is lax.
• D. The subsidiary is located a considerable distance from FGT's home country.
• E. The subsidiary's host country requires the active participation of local partners before the subsidiary can operate.

V buys vegetables and fruit from three farms located in a different part of V's country and sells them to large supermarket chains.
A recent newspaper magazine had an article on these farms showing that the farms employ illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant conditions. They are forced to live in small overcrowded caravans with no running water. They are also given meals which are cold and poor quality. These farms are located in a developed country with strong labour laws.
Classify each of the following statements as true or false.

In relation to the use of the adjusted present value (APV) technique, which of the following statements are correct?

• A. The weighted average cost of capital - net present value technique and the APV technique will, if applied correctly, give the same answer.
• B. The interest tax shield on the project's debt must be known, or at least estimated.
• C. To apply APV, the proportions of debt and equity in the capital structure must be known.
• D. To apply APV the actual amounts of debt and equity in the capital structure must be known.

Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?

• A. Expected value
• B. Simulation
• C. Regression analysis
• D. Value at Risk

Z is a multinational pharmaceuticals company with operations across Europe, America and Asia.
It is currently investigating the possibility of setting up a chemical and specialist production facility in South America. This would be a multi $billion investment. What steps should Z take to manage the following risks in this long term venture.