An American mentality.

• Author: Howell, Llewellyn D.
• Position: World Watcher - Evaluation of political risk in the U.S. - Business Environment Risk Information model

IN THE FOREIGN INVESTMENT and globalizing world, political risk is a critical factor in go and no-go decisions and in projecting management needs to deal with the vagaries of social and cultural environments. A variety of models are employed to assess the level of risk for new investors. These models typically contain some measure of the levels of democracy, ethnic tension, and violence (domestic and international), as well as involvement of the military and religion in politics.

As a recipient state for foreign investment today, the U.S. is subject to the same risk assessments as any other host nation. Risk still has to be managed, even when the investor is a Malaysian and the host country is the U.S.

The Business Environment Risk Information (BERI) model contains a variable that it calls "mentality" in its formula for national risk assessment. The idea is that there can be a national attitude, a mentality, that would be resistant or corrosive to foreign investment and prevent efficient and productive investment and business operations.

While BERI does not release data on its mentality factors, it does indicate that the rating for the U.S. (six on a scale of 11) has declined in recent years, demonstrating more investment risk emanating from the national character. Observers of the American scene can make their own assessments, but here are some of the commonly cited circumstances that have led to BERI's recent conclusions about U.S. society.

Corruption is the use of monetary and other rewards to alter the course of law enforcement, implementation of regulations, or pursuit of legal contracts. In a corrupt environment, processes and structures become distorted and predictability is irregular. Corporate corruption has become common fare in business reporting over the last few years, with Enron, Tyco. Global Crossing, and others on the big name list. The Martha Stewart case typifies practices at a lower end of the business spectrum that many think may be just as pervasive as the corporate leadership violations.

Nepotism is the granting of opportunities--economic, political, social--to persons related to the decisionmaker and circumventing normal competitive processes for employment or advancement. The concept may be extended to include close friends or colleagues as well as distant family. We use the term "cronyism" to point fingers of blame for this practice in Indonesia and Russia. This has not been a notable problem in the U.S., but names...