Political Risk

What this video covers

• Why political risk sits at the intersection of systematic and non-systematic risk, and how government actions can affect either entire markets or single industries
• The full range of political risk types, from gradual policy shifts to sudden upheavals: leadership changes, targeted regulations and taxes, nationalization, trade restrictions and tariffs, war and civil unrest, and currency controls
• Which investments face the highest political risk, with American Depositary Receipts (ADRs), international mutual funds and exchange-traded funds (ETFs), foreign bonds, and emerging market positions as the most vulnerable
• Why domestic investments are also exposed to political risk, and how a U.S. regulation targeting healthcare or energy qualifies just as much as a foreign revolution
• The precise, narrow definition of sovereign risk: a foreign government defaulting on its debt, which is credit risk applied to government bonds and not a synonym for political risk
• How to avoid the exam's most common trap: selecting sovereign risk for scenarios involving nationalization, war, or regulatory change