POLITICAL

RISK
 POLITICAL RISK
• is the risk of a change in political
environment or government policy
that would affect a company’s ability
to operate effectively and profitably.

• it’s the risk of financial, market or

personnel loses because of political
decisions or disruptions.
 CATEGORIES OF
POLITICAL RISK
ECONOMIC BUSINESS PRS GROUP
• INTELLIGENCE
UNIT
ENVIRONMENT
RISK
WORLD
POLITICAL RISK
INTELLIGENCE FORECASTS
(BERI)

War Fractionalization Political turn oil

of the political probability
spectrum
Social unrest Fractionalization Equity restrictions
by language,
ethnic, or religious
groups.
Orderly Political Restrictive or Local operations
Transfer coercive measures restrictions
required to retain
power
 CATEGORIES OF
POLITICAL RISK
• Political motivated Mentality Taxation
violence (xenophobia, discrimination
nationalism,
corruption,
nepotism)
International disputes Social conditions Repatriation
(including population restrictions
density and wealth
distribution)
Change in Organization and Exchange controls
government or pro - strength of forces for a
business orientation radical government
 CATEGORIES OF
POLITICAL RISK
• Institutional Dependence on or Tariff barriers
effectiveness importance to a
major hostile
power
Bureaucracy Negative influences of Other barriers
regional political
forces
Transparency and Societal conflict Payment delays
fairness involving
demonstrations,
strikes, and street
violence
 CATEGORIES OF
POLITICAL RISK
• Corruption Instability as Fiscal or monetary
perceived by expansion
assassinations and
guerrilla war
Crime Labor costs, foreign
debt
 CAUSES OF POLITICAL
RISK
• Tension
- is the fundamental cause of
political risk between the
residents’ aspiration and goal
and the real conditions at a
given time.
 TENSION
In high income countries, the
gap between aspirations and
reality and in high income
countries is seldom enough to
generate a significant level of
political risk.
TENSION
 TAXES
• Is a lifeblood of every governments.
• Government taxation policies on the
sale of goods and services frequently
motivate companies and individuals
to profit by not paying taxes.
• Corporate Taxation is another issue.
SEIZURE OF ASSET
• The ultimate threat a government
can pose toward a company.
• Expropriation government action to
dispossess a foreign company or
investors.
• Confiscation
• Domestication
 Internationa Law
• may be defined as the rules and
principles that nation states consider
binding upon themselves.
• pertains to property, trade,
immigration and other that have
traditionally been under the
jurisdiction of individual nations.
 Internationa Law
• International law applies
only the extent that
countries are willing to
assume all rights and
obligations in these areas.