Political instability poses significant risks to foreign investment, as investors seek stable environments for their assets. Uncertainty regarding government policies, potential for civil unrest, and economic volatility can deter investment or lead to capital flight. Companies often assess the political landscape before committing resources, favoring countries with predictable regulations and a stable rule of law. Conversely, unstable regimes may create opportunities for higher returns, attracting risk-tolerant investors. However, the potential for loss due to sudden political changes can outweigh such rewards, making stability a crucial factor in investment decisions.