Final answer:
Foreign direct investment (FDI) is the riskiest strategy for entering a foreign market, as it involves a long-term commitment and potential managerial responsibilities, along with exposure to exchange rate fluctuations and regulatory challenges.
Step-by-step explanation:
The strategy for entering into a foreign market that has the highest degree of risk is foreign direct investment (FDI). FDI involves a long-term commitment and typically includes the investor taking on some managerial responsibility. In comparison to portfolio investment, where an investor may simply buy or sell assets like stocks or bonds with ease, FDI requires the investor to buy a significant part (more than ten percent) of a company, which can lead to direct management. This not only exposes the investor to risks associated with the day-to-day operations of the foreign company but also introduces potential risks such as facing high tariffs, dealing with complex permit systems, and navigating potentially corrupt systems for market access. Moreover, the investor is also subject to risks of exchange rate fluctuations which could lead to large trade imbalances and very high inflows or outflows of financial capital. Undertaking FDI can be particularly challenging in markets with significant barriers to entry, where forging partnerships or long-term commitments can be stymied by regulatory, competitive, or political hurdles.