Final answer:
The most severe political risk of global business is government action of domestication, which refers to the government taking control over foreign-owned assets or businesses. This can have significant negative impacts on global businesses operating in those countries.
Step-by-step explanation:
In the context of global business, one of the most severe political risks is government action of domestication. Government action of domestication refers to the government taking control over foreign-owned assets or businesses within their own country. This can include nationalizing industries, imposing heavy regulations, or seizing assets, which can have significant negative impacts on global businesses operating in those countries.
For example, a government might nationalize a foreign oil company, resulting in the loss of ownership and control for the foreign company. This can lead to financial losses and a lack of confidence for other global businesses looking to invest in that country. Another example is the imposition of strict regulations that make it difficult for foreign businesses to operate efficiently, leading to increased costs and decreased profitability.
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