[3] 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 (fiscal, monetary, trade, investment, industrial, income, labour, and developmental), or events related to political instability (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.
[11] Other companies which offer publications on macro-level political risk include Economist Intelligence Unit, DaMina Advisors, iStrategic LLC, IHS Markit, Jane's and The PRS Group, Inc. DaMina Advisors is focused on frontier markets such as Africa.
In addition to the macro political risks, companies have to pay attention to the industry and relative contribution of their firms to the local economy.
This type of risk process includes the project-specific government review Committee on Foreign Investment in the United States (CFIUS), the selection of dangerous local partners with political power, and expropriation/nationalization of projects and assets.
To extend the CFIUS example above, imagine a Chinese company wished to purchase a U.S. weapons component producer.
A micro-level political risk report might include a full analysis of the CFIUS regulatory climate as it directly relates to project components and structuring, as well as analysis of congressional climate and public opinion in the United States toward such a deal.
This type of analysis can prove crucial in the decision-making process of a company assessing whether to pursue such a deal.
Geopolitical risks such as wars, terrorist acts, military attacks, or diplomatic conflicts around the world are of major concern to business, financial market participants, public media, and policy makers.