Part I Assessment and Pre-Investment Management of Political Risk, 1 Political Risk

Subject(s):

Foreign Direct Investment — Investor

This chapter discusses the types of political risk that foreign investors are likely to encounter, the factors that contribute to political risk, and some practical steps that investors might take to measure political risks in a particular State before investing capital. For investors concerned with political risk, the primary distinction to be made is between detriment (loss) proximately caused by the host State or its agents, and that caused by the commercial realities of supply and demand, or by natural disasters. This line is far harder to draw in practice than in theory: the scenarios investors face in carrying out a long-term business project on foreign soil are complex and affected by a range of factors, both within and outside government control.