RISKS TO CONSIDER WHEN INVESTING OFFSHORE

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N.J. Godi, J. Young

DOI:10.22495/cocv11i1art3

Abstract

When investors engage in international business, transactions and operations, they encounter additional risks compared to trading domestically. Different languages, currencies, jurisdictions, customs and habits can be translated into extra informational asymmetries and transaction costs that may affect the smooth operation of business. Political transitions can also play an important role in the success of an offshore investment, especially in a world full of political uncertainty. As such, mitigating offshore risks is a significant factor in the success of overseas projects, investments and contracts. As such, this paper aims to identify risks which investors are exposed to when investing offshore and ranking these risks in order of importance, based on a literature review as well as views and experiences of South African investment brokers registered with the Financial Services Board.

Keywords: Risks, Investors, Offshore Investments, Foreign Exchange, Market Risk, Exchange Rate Risk, Credit Risk, Liquidity Risk, Technological Risk

How to cite this paper: Godi, N. J., & Young, J. (2013). Risks to consider when investing offshore. Corporate Ownership & Control, 11(1), 32-39. http://dx.doi.org/10.22495/cocv11i1art3