The risk of loss or damage due to government regulations, regime changes, nationalization of industries, and war, among others.
Example:
You pay a visit to a developing nation which is home to unique archaeological sites.
Downside Scenario:
A political coup ensues, forcing you to evacuate and leave behind all your possessions.
Upside Scenario:
You are able to get a very close look at the most exciting archaeological digs in the world.
Related terms:
Legislative Risk
The risk of loss or damage due to government legislation.
Sovereign Risk
The risk that a sovereign government will not pay its debts.
Transfer Risk
The risk that funds situated in another country will be frozen.
Country Risk
A combination of risks inherent in dealing with another nation. Includes foreign exchange (FX) risk, sovereign risk, transfer risk, legislative risk, political risk.