Political risk is one of the different elements of country risk that a company must take into consideration when operating internationally. Political risk reflects the risk posed by the government of a country, including risks that the government will take action against your company (China v. Google), up to and including the risk of nationalization (Argentina v. YPF). Governments have the capacity to, in an unpredictable and ad hoc manner, change the rules governing a company's operations in a country. In the West, where political processes tend to be transparent, it is a lot easier to understand and measure political risk. Political risk, it should be noted, reflects actions taken on existing ventures, and not something like project approval. So Keystone XL is a pending decision, not a political risk. Risk would be if Keystone is approved and then after it is started the next government moves to block the project retroactively.
Dekra in Germany
Dekra is a vehicle inspection company based in Stuttgart. One does not normally talk about political risk in the home country. Risk represents the unknown, and if there is any political environment that a company knows, it is the domestic one. The German political environment is relatively transparent. So are there political risks? Dekra was founded in 1925, which means that it did face a very high degree of political risk early on in its existence, as the company was shut down during the war. Any operations in the East would have been nationalized after the war. But otherwise Germany has proven a stable and transparent place with respect to political risk.
One political risk is that the inspections are mandated in part by German law. Changes to the laws can reduce the demand for vehicle inspections. For example,...
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