Which risk category focuses on the possibility that political decisions or geopolitical instability may affect profitability?

Which risk category focuses on the possibility that political decisions or geopolitical instability may affect profitability?

• A. Reputational Risk
• B. Political Risk
• C. Operational Risk
• D. Financial Risk

Answer: (B)

Political risk is the category that deals with how government decisions or geopolitical instability can influence profitability. It covers events such as changes in regulation or taxation, expropriation or nationalisation, sanctions, trade barriers, and geopolitical turmoil that can affect demand, costs, access to markets, or the value of assets. When the focus is on how political actions or instability might erode profits or alter expected returns, this risk type best captures that exposure. Reputational risk relates to harm to image, operational risk to failures in processes or systems, and financial risk to market or liquidity/crisis factors not specifically driven by political actions.

Political risk is the category that deals with how government decisions or geopolitical instability can influence profitability. It covers events such as changes in regulation or taxation, expropriation or nationalisation, sanctions, trade barriers, and geopolitical turmoil that can affect demand, costs, access to markets, or the value of assets. When the focus is on how political actions or instability might erode profits or alter expected returns, this risk type best captures that exposure. Reputational risk relates to harm to image, operational risk to failures in processes or systems, and financial risk to market or liquidity/crisis factors not specifically driven by political actions.