Politics can enormously impact business. As a result of this, aspiring entrepreneurs, business leaders and corporate strategists in heavily regulated industries should familiarise themselves with its effects. With the US presidential election looming, economies depending on that country should pay close attention to the potential fall-out from a Harris or Trump win.

Here is an overview of the role politics plays in business, domestically and internationally, and why it is important to understand it. Governments have the critical task of protecting their citizens. For instance, to protect citizens’ well-being and guarantee a living wage, a government may impose a base pay requirement. The minimum wage in The Bahamas, for example, is $260 per week. This is the Government’s effort to ensure that each worker has the minimum required to afford their basic needs.

Protecting citizens’ property rights also has a major impact on businesses. Those hoping to create firms must be assured they own the rights to their products. For this reason, governments establish copyright and trademark laws to ensure companies maintain ownership of their goods or brands they produce.

While politics can benefit businesses by creating value, it can also interfere with value creation. Whether through corruption or subsidising domestic companies, several challenges can arise that threaten a company’s well-being.

One of the primary challenges that companies encounter is corruption. The ability to influence businesses, regardless of whether doing so creates value, can allow officials to take advantage of their power.

An additional challenge arises when international companies enter domestic markets. Consumers who purchase from your business could turn to international competitors. This can be difficult because your competition may provide similar products at lower costs.

Another challenge with conducting international business is encountering situations where investments are withdrawn from a country. This can occur when governments take more power than they are entitled to. In these situations, such countries could become highly dangerous to conduct business in.

Understanding global politics is critical to your company’s success, regardless of whether you plan to expand internationally. It is always possible an opportunity to globalise your business will arise. Knowledge of global politics is important because of international competition from foreign companies. Yet, global political challenges can produce multiple opportunities. An effective business strategy takes both globalisation and domestic factors into account.

• NB: Ian R Ferguson is a talent management and organisational development consultant, having completed graduate studies with regional and international universities. He has served organisations, both locally and globally, providing relevant solutions to their business growth and development issues. He may be contacted at tcconsultants@ coralwave.com.