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What is government risk?

Government risk

It's a term used by investors to describe the potential impact of proposed changes to legislation or corruption by those in positions of power. Government risk can increase the costs of running a business, make an investment less attractive or alter the competitive landscape of a country.

Where have you heard about government risk?

The term is typically used to distinguish it from other forms of risk, such as market risk, credit risk and natural risk when assessing the viability of an investment.

What you need to know about government risk.

There are a number of decisions made by governments that can affect companies, industries and the overall economy - and therefore your investments. These include law changes on taxes, spending, the minimum wage and environment. Even if legislation is just in the planning stages, it can still have an impact.

Government risk is often confused with ‘country risk’ when assessing investments, but it's actually a sub-division of country risk. Government risk refers specifically to interactions with government, but doesn’t include currency risk or terrorism risk.

Find out more about government risk.

Read our definition of country risk to see how it differs from government risk.

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