Suggested Reading



  • Peter Schwartz’s The Art of the Long View, Planning for the Future in an Uncertain World (Doubleday, 1996). Amazon listing here.
  • Ian Bremmer and Preston Keat’s The Fat Tail: The Power Of Political Knowledge in an Uncertain World (Oxford University Press, 2010). Amazon listing here.

Political Risk Defined

While there is no settled definition on political risk, the literature typically identifies political risk as any action or behavior from a state actor that can affect a corporation’s financial or economic well-being. For example Skipper & Kwan’s International Risk textbook identifies political risk as “Any governmental action that diminishes the value of a firm operating within the political boundaries or influence the government.”[1] Similarly, the CEO of one of the leading geopolitical risk consultancies Ian Bremmer defines political risk as “The probability that a particular political action will produce changes in economic outcomes.”[2] Note also that these definitions include “sovereign” risk, which describes direct government interventions in business outcomes, but also other political, economic, and local impact beyond just the state.[3] With such sweeping definitions, it is a wonder that political risk does not get more attention from a business as well as a purely risk management perspective.


[1] W. Jean Kwon and Harold D. Skipper. Risk Management and Insurance: Perspectives in a Global Economy. Wiley-Blackwell Publishing; Malden, MA (2009).  Page 431.

[2] Bremmer, Ian. The Fat Tail: The Power of Political Knowledge in an Uncertain World. Oxford University Press (2010).

[3] Kesternich, Iris and Monika Schnitzer. “Who Is Afraid of Political Risk? Multinational Firms and Their Choice of Capital Structure.” Journal of International Economics, Vol. 82, Iss. 2 (Nov. 2010> Available here (Links to an external site.).