What is political risk?
Political risk is the impact of politics on market outcomes.
In recent years, investors have increasingly recognized that politics matter at least as much as economic fundamentals in many markets. Eurasia Group has been at the forefront of developing comprehensive and systematic tools for evaluating political risk.
To succeed in the current global marketplace, investors must look beyond reassuring data about per-capita income or economic growth and assess the political risk of doing business in particular countries-sector by sector and project by project. There are four essential dimensions of political risk to examine in a country:
- the stability of a regime and strength of its government;
- personal and state security, and how prepared government is for future potential disasters;
- social trends, such as demographic shifts and growing income gaps; and
- economic factors, such as unemployment, debt, and the openness of the economic regulatory environment.