Globalization can reduce risk when one country is doing poorly because:

• A. It always reduces costs.
• B. Risks are reduced when one country is doing poorly, another might be ok.
• C. It eliminates competition.
• D. It ensures universal political stability.

Answer: (B)

Spreading business activity across many countries reduces risk by diversifying where profits come from. If one country falls into a downturn, demand, earnings, and even supply can come from other places that are performing better, keeping overall results steadier. This cross-country diversification lowers the impact of country-specific problems on the whole portfolio or company, which is the core idea behind globalization helping manage risk. Globalization doesn’t guarantee lower costs, it doesn’t wipe out competition, and it doesn’t ensure political stability everywhere, but it does create the cushion of having multiple markets that can offset each other when one market weakens.