The risk that a government will take an action that negatively affects the values of firms operating in that country

Question

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Political risk refers to the risk of negative impact on a firm's operations or values due to the actions of a government, such as changes in regulations, expropriation of assets, or political instability. Transactions exposure refers to the risk of fluctuations in exchange rates affecting the value of transactions, while translation exposure refers to the risk of fluctuations in exchange rates affecting the value of foreign assets or liabilities on the balance sheet. Economic exposure refers to the risk of changes in macroeconomic factors affecting a firm's revenues and costs.

The Risk That a Government Will Take an Action That