Investment and Market Risks - Essay Example

Loss of investment is one of the major risks in the markets due to their volatility and their dependence on other economies of the world. For example, investors lose billions of dollars of their money when Pakistan's stock market crashed in 2005. 

This list of risks is not exhaustive, but there are also thousands of other risks when investing in an emerging market. Another major risk is differences in the culture and religion of the host country and the company. In 2006/7, there was an issue of blasphemous cartoons being published in Norwegian newspapers. This angered Muslims all over the world. Telenor, one company which is from Norway operating in Muslim countries like Bangladesh and Pakistan suffered as a result. Many people stopped using their service and many governments threatened or fined the company. To make the matters worse people also protested and damaged their branches. As a result, the company suffered huge losses and at one time it looked like the whole of their investment is going to go wasted. (Grameen Phone, 2005)

Similarly, the disparity of income in many countries has made matter worse for these businesses. For example, Subway initially entered as a luxury brand in Pakistan. But because people in Pakistan are generally poor, they were not able to afford this expensive food, and hence the business suffered huge losses until they bring their prices down which implied a reduction in profits for SubWay.