The term "political risk" refers to the potential for a business's operations and investments to be adversely impacted by political changes or instability in a country. This encompasses factors such as government policies, social unrest, corruption, and changes in regulations. For businesses operating internationally, understanding political risk is crucial for developing strategies to mitigate potential losses. Investors often assess political risk when deciding where to allocate resources or establish operations, as higher political risk may lead to uncertainties that can affect profitability and overall business sustainability.