Country Risk Analysis



In the effort to reduce company risk while simultaneously expanding operations, the firm should consider expansion into a new geographic market. By taking advantage of the unique attributes of the Irish economy and aligning them with the characteristics of this company, the potential to maximize shareholder wealth improves while the risk exposure of the company declines. By expanding our information technology operations into Ireland, this risk/return strategy can be successfully accomplished.
Located just west of Great Britain, the Republic of Ireland is a small island state surrounded by the Atlantic Ocean. The population in 1999 was estimated at 3,632,944 people. The estimated growth rate each year was also estimated at .38% each year. Of this, people held the Nationality of being Irish, and their decent was mostly English and Celtic. Their has been a very distinct religious dominance in this country, with 92% of the population being Roman Catholic, and 3% Anglican, and the other 5% was comprised up of Jehovah’s Witnesses, Jewish, and Others. As for a language, the people of Ireland mostly speak English, but Irish, a unique dialect of Gaelic, is spoken mainly in areas located along the western coast.
In 1921, the pushes of Nationalism resulted in the Independence of Ireland from their mother country, the United Kingdom. Since then, much dispute about the status of Northern Ireland, which remains under the control of the British, have caused periods of severe conflicts between the Protestant control government and the Catholic population of Northern Ireland. Currently, peace talks are in progress between the Northern Ireland and British governments.
In terms of their governmental structure, Ireland is a republic, and they have had their Independence since December 6, 1921. Internally, the structure of their governing powers is as follows. There is a Chief of State (president), Head of Government (Prime Minister), a Cabinet, a Legislative Branch and a Judicial Branch. These governing offices do work together in order to establish a well functioning government for the country. Along the lines of politics, there are also practicing political parties that represent different areas of interest to the Irish people. There are active military branches including the Army, Naval Services and Air Corp., as well as the National Police.
The government of Ireland has worked very hard to boost its country’s economy. Over the past ten years, the government has implemented a series of national economic programs that have been designed to hinder inflation, reduce government spending, and to also promote foreign investments. Although Ireland is a small, modern, trade-dependent country, there have been some recent changes. The economy of Ireland is averaging a growth rate of 9.5% per year. For the last ten years, the growth rate of Ireland’s economy has been over three times the EU average.
Exports have remained the primary contribution to Ireland’s growth, but consumer spending, and the recovery of construction and business investments, have contributed to the economy’s performance. In 1998, the estimated GDP was $67.1 billion. In terms of per capita income, its estimate was $18,600. Ireland has an unemployment rate of about 5% - less than half the EU average.
In a recent article in the Irish Times, “Irish Unions Warn Gov’t Wage Pact Threatened By Inflation,” it was reported that the Irish government has recently made agreements with labor unions regarding a national pay agreement. They received warning by labor unions that this agreement may be threatened by rising inflation. Ireland currently is facing a very high inflation rate of 5%. This is the highest percentage in the whole EU. This new wage deal that had been agreed upon locked in cumulative pay raises totaling 15.75% over the next 33 months. According to many economists, over the past 10 years, the wage pacts have become a “cornerstone” for Irelands economic reversal. This reversal has seen GDP grow for an average of 9% per year between 1994 and 1999. The pact was called the Program for Prosperity and Fairness, and its purpose was to draw up a plan to make cost of living expenses reasonable in relation to inflation. Currently, Ireland is working to create a prospering economy, make sure that inflation is under control, and keep unemployment down.
Ireland’s information technology industry has developed rapidly in recent years. Since 1980, 40% of all investment