"Political risk is a type of risk faced by investors, corporations, and governments that political decisions, events, or conditions will significantly affect the profitability of a business actor or the expected value of a given economic action."
The risk of political instability or adverse government action that can impact international trade.
Political risk: The various types of political risks that businesses face, including sovereign risk, transfer risk, operational risk, and more.
Country risk: An analysis of the economic, financial, and political factors associated with a country that can impact businesses operating in that country.
Regulatory risk: Understanding the laws and regulations that impact international trade, and staying up to date on changes to those laws.
Market risk: Analyzing the risks of entering a new foreign market, including competition, consumer behavior, and market saturation.
Environmental risk: Assessing the environmental factors that can impact international trade, such as natural disasters, pandemics, and climate change.
Cultural risk: Examining the cultural differences that can impact business operations in foreign markets, such as language barriers and different social norms.
Economic risk: Understanding the economic factors that can influence international trade, including changes in exchange rates, inflation, and interest rates.
Legal risk: Knowing the legal systems in foreign markets and assessing the risks associated with contracts, intellectual property protection, and disputes.
Political stability: Understanding the stability and predictability of a country's political system, and assessing the risks associated with political instability.
Corruption: Understanding the risks associated with corruption in foreign markets, including bribery, blackmail, and theft of intellectual property.
Infrastructure risk: Analyzing the risks associated with a country's infrastructure, such as transportation systems and communication networks, that may impact international trade.
Reputation risk: Assessing the risks associated with a company's reputation in foreign markets, such as negative publicity or harm to the brand.
Supply chain risk: Understanding the risks associated with a company's supply chain, such as disruptions caused by natural disasters or political instability in a foreign country.
Cybersecurity risk: Assessing the risks associated with cyberattacks, data breaches, and other cybersecurity threats that can impact international trade.
Geopolitical risk: Evaluating the risks associated with geopolitical events, such as military conflicts or changes to global trade policies, that can impact international trade.
Country Risk: The risk that political events or economic conditions in a particular country may negatively affect trade flows or investments, such as changes in government policies or instability, corruption, or violence.
Sovereign Risk: The risk that a foreign government may default on its debt obligations, including loans or bonds purchased by foreign investors, due to a variety of factors such as low GDP growth, high inflation or currency depreciation, or political instability.
Regulatory Risk: The risk that a foreign government may impose new regulations or restrictions on trade, such as tariffs or quotas, or change existing rules, affecting the profitability or feasibility of international business activities.
Contractual Risk: The risk that changes in political or economic conditions in a foreign country may affect the ability of a company to fulfill its contractual obligations or enforce its legal rights, leading to disputes, legal actions, or loss of investments.
Operational Risk: The risk that a company's operations in a foreign country may be affected by political or social instability, terrorism, natural disasters, or other events, causing disruption or damage to resources, personnel, or property.
Currency Risk: The risk that fluctuations in exchange rates may negatively affect the returns or costs of international trade, such as reducing profits, increasing debt burden or transaction costs, or affecting the competitiveness of exports or imports.
Reputation Risk: The risk that negative perceptions or reactions from the public, media, or other stakeholders may affect the image or brand of a company engaged in international trade, such as through association with controversial political regimes or unethical business practices.
Intellectual Property Risk: The risk that a foreign country may not adequately protect or enforce intellectual property rights, such as patents, trademarks, or copyrights, leading to infringement, piracy or loss of market share in a specific industry.
Environmental Risk: The risk that environmental regulations or public concerns may affect the operations or products of a company engaged in international trade, such as through the adoption of carbon taxes, emission standards, or bans on certain activities or materials.
Social Risk: The risk that cultural or social differences in a foreign country may affect the business practices or relations of a company engaged in international trade, such as through ethical, moral, or religious beliefs, or different labour standards or practices.
"Political risk can be understood and managed with reasoned foresight and investment."
"The term political risk has had many different meanings over time."
"Political decisions refer to any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives."
"Political risk faced by firms can be defined as 'the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies or events related to political instability.'"
"Events related to political instability include terrorism, riots, coups, civil war, and insurrection."
"Moreover, governments may face complications in their ability to execute diplomatic, military or other initiatives as a result of political risk."
"The field has historically focused on analyzing political risks predominantly in emerging economies, but such risks also exist in developed economies and liberal democracies as well."
"A low level of political risk in a given country does not necessarily correspond to a high degree of political freedom."
"Long-term assessments of political risk must account for the danger that a politically oppressive environment is only stable as long as top-down control is maintained and citizens prevented from a free exchange of ideas and goods with the outside world."
"Understanding risk partly as probability and partly as impact provides insight into political risk."
"For a business, the implication for political risk is that there is a measure of likelihood that political events may complicate its pursuit of earnings through direct impacts or indirect impacts."
"The likelihood of a political event occurring may reduce the desirability of that investment by reducing its anticipated returns."
"Macro-level political risks have similar impacts across all foreign actors in a given location."
"While these are included in country risk analysis, it would be incorrect to equate macro-level political risk analysis with country risk as country risk only looks at national-level risks and also includes financial and economic risks."
"Micro-level risks focus on sector, firm, or project-specific risk."
"Portfolio investors may face similar financial losses."
"Political actions or developments can also create upside risks or opportunities for companies and governments."
"Indeed, some of the more stable states are also the most authoritarian."
"Political risk refers to the complications businesses and governments may face as a result of political decisions, events, or conditions altering the expected outcome and value of a given economic action."