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.

Multinational Corporations’ Key Stakeholders in the Economic Development in Less Economically Developed Countries: A Literature Review

“…Bakre (2008) and Amusan (2018) stated that the presence of MNCs has benefited the elites, those in power, but has left communities around where these resources are extracted languishing in poverty and economic misery. This argument was further communicated by Iftinchi and Hurduzeu (2018) and Adeola et al (2021), who asserted that:…”

“…Leonard (1980) also explained that MNCs greatly influence many politicians in developing countries. Supporting this view, Iftinchi and Hurduzeu (2018) revealed that "MNCs use lobbying and advocacy to engage with governments and politicians in the country of origin and host countries to mitigate political risk".…”