HOW MULTINATIONAL CORPORATIONS USE LOBBYING AND ADVOCACY TO MITIGATE POLITICAL RISKS

Abstract

In their international activities multinational corporations (MNCs) face various risks. Political risk is one of them. Expropriations, transfer and convertibility restrictions, breach of contracts, acts of terrorism, domestic political violence or other adverse regulatory changes and/or negative government action represent forms of political risks. Incorporating political risk in their risk management strategies becomes a necessity for MNCs in their search for profits and new markets. This article presents how MNCs use lobbying and advocacy as means to engage with governments and politicians in the country of origin (home country), in the country where a MNC has operations (host country) or at international level (by creating ties with international organisations) in order to mitigate political risks. The case of Repsol and its investment in Argentina is used to demonstrate the application of such tools. The article presents two limitations that might determine the success or failure of MNCs’ lobbying and advocacy activities: governments' unpredictable views towards MNCs and reputational risks. The article has also identified a main difficulty in identifying and examining MNCs way of using lobbying and advocacy to engage with government officials and politicians. This difficulty comes from the informal character of such contacts which makes lobbying and advocacy almost impossible to identify.

Keywords

• political risk
• multinational corporations
• lobbying
• advocacy
• risk management