Business-government Relations, Risk of Nepalese Political Environment

The primary goals of the government are to promote economic development, employment, regional equality, social justice, pricing stability, and economic stability. The government relies on the business community's cooperation to accomplish these goals. The growth of commercial activity in a nation is a sign of more tax receipts for the government, more jobs, and improved public services.

The government has a variety of business-related duties. However, the crucial roles of the government are the following three categories:

• Facilitating Role:
  • The government plays a facilitative role by providing the firm with a number of facilities, including financing, basic public services, the organization of needed supplies at reduced prices, etc.
• Regulating Role:
  • In order to prevent undesired outcomes like the creation of monopolies, the concentration of economic power in a small number of hands, etc., the government sets the parameters of operation and freedom.
• Entrepreneurial Role:
  • The government encourages the creation of businesses like public utilities and public enterprises in order to drive and quicken the pace of the economy's growth and development.

However, the precise function of government will evolve over time. Electricity and telecommunications were once considered to be uncompetitive natural monopolies. Either the government would have to closely control these industries or take over production. Today, because to advancements in technology and thought, we are aware that, with the right legal framework in place, competition may be seen in even these industries. They may promote rivalry to energize market forces. Agencies of both the public and commercial sectors may be established to compete. Therefore, the policies that encourage incentives based on competition and property rights are the foundation of market economies.

The tools at the government's disposal to control commercial and economic activity are public policies. There are three main categories of public policy in particular that influence how businesses and governments interact.

• Distributive Policies (such as traffic, government contracts, etc.)
• Redistributive Policies (such as progressive taxation and welfare policies)
• Regulatory Policies (such as the imposition of rules concerning pollution by a government on the industry).

People who favor minimal government involvement contend that companies should be as free as possible to respond to market factors. They believed that government meddling with market processes was disruptive. Government intervention is viewed as necessary by proponents of this theory to prevent the collapse or failure of market systems. Thus, for both parties' mutual benefit, the partnership between business and government is extremely important. The interaction is a "give and take" game. However, generalizing the university of business-government relations is difficult. Business and government relationships can be cooperative or hostile depending on the country. As a result, the relationship between business and government has become one of the main topics of discussion in modern politics.

Risk of Nepalese Political Environment

Political risk refers to the possibility of financial market losses or personnel disruptions as a result of political actions, known also as "geopolitical risk." Business and politics have a close relationship. Political risks are any changes in the political climate that could negatively impact the value of the company's business operations. Companies may be subject to political risks as a result of government action or even unrelated government-controlled acts. New laws being passed, rising operating costs, currency depreciation, more taxes, and other dangers are all consequences of governmental activity. Risks can also be caused by non-governmental activities including terrorism, kidnapping, and extortion.

Governmental leaders' political decisions, for instance, about taxes, currency valuation, trade barriers, wage levels, labor laws, environmental restrictions, and development priorities, can have an impact on the viability of businesses. Non-economic variables might also have an impact on a firm. For instance, political disturbances like terrorism, riots, coups, civil wars, international conflicts, and even political elections that could change the administration in power can have a significant impact on how well businesses can function. Investors in multinational firms and investment fund portfolios both suffer political risks. These political hazards are included in the calculation and disclosure of risk factors, which are often contained in the prospectus for a firm or portfolio.

Risks are becoming more and more political in character as a result of or due to political changes. Wars, uprisings, insurrections, and conventional warfare all exist. Currency controls, changes in tax legislation, government action, nationalization of businesses, etc. are the most obvious examples of political risks despite being less dramatic. Thus, political risk depends on (a) the likelihood that a given political event will have an impact on a particular firm and (b) the size of the event. Every nation faces some level of political risk, but these risks can take many different forms. Business firms may experience one of three main categories of political risks:

• Ownership risk: Political risk of ownership is the most prevalent kind. The firm's assets and way of life are exposed by this risk.
• Operating risk: This risk relates to disruption of a company's ongoing operations.
• Transfer risk: This risk frequently arises while attempting to transfer money from one nation to another.

Businesses evaluate political risks from a variety of angles. To assess the political risk of a country, one must look at its investment environment. Political risk analysis can be conducted from the following two angles:

• All businesses operating in a nation are impacted by macropolitical risks. Civil conflicts, rioting, terrorism, and other such threats are examples.
• Micropolitical risks only have an impact on a single firm or set of firms operating in a single industry. Examples of such risks are protests against such products, boycotts and campaigns against foreign goods, and the like.

The firm's risk assessment should be more comprehensive the larger and longer-lasting its investment. This section's goal is to offer a framework for a systematic assessment of political risk and how it affects business decision-making.

Reference:

• Pant, P. R. (2009). Business Environment in Nepal (SIXTH ed.). Kathmandu, Nepal: Buddha Academic Publishers and Distributers.
• wikiversity.org/wiki/Government-Business_Relations
• wikipedia.org/wiki/Political_risk