Political risk is the risk of adverse changes in a country's political, economic and social environment. Political risk may involve changes in government, policy, or military action. It can also refer to the potential impact on an investment of a particular country's political, economic and social environment.
Political risk is the risk that a government or business entity may suffer from a change in political regime, or be subjected to political intervention. Political risk can be broadly divided into two categories: 1) External political risk 2) Internal political risk
Political risk can be defined as the uncertainty of what may happen in the future. It comes from either external events such as wars and natural disasters or from internal factors such as economic instability. The most common example of political risk is the risks that arise from changes in government policies.
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