Financial Solutions to other International Investment Risks

–          There are moral hazard risks engendered by dealing with foreign authorities.

–          Management of this risk is possible through invoking lessons taught in agency theory. The trick is to anticipate potential situations where the host country would be likely to take action, and build automatic and irreversible counter-incentive into the original agreement.

–          Usually involves a third party who the host country must appease (i.e. World Bank, IMF).