The series captures the experience, innovative approaches and solutions for development of the World Bank Group covering financial sector topics of relevance to both the public and private sectors. The series is comprised of short knowledge notes, policy notes, case studies, lessons learned or a combination therein. This series was formerly known as Finance in Focus.
(World Bank, Washington, DC, 2020-08-12)
Kher, Priyanka; Chun, Dongwook
Political risks covers a wide range of
issues, and this note focuses on a subset of political risk:
the risks that arise from government actions, whether
political or regulatory, that can affect the profitability
of an investment in a foreign country. Policies adopted and
implemented by governments can directly mitigate these
risks. Bad governance and economic crises are two big
drivers of political risk. Both are currently prevalent
globally, but especially in developing countries. The
purpose of this note is to summarize how political risk
caused by government actions can impact foreign investment,
and what tools countries can use to manage and mitigate such risks.