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When does political risk for business increase?

Answer and explanation

Correct answer: When government policies change unexpectedly

Political risk increases when the government makes sudden changes in taxes, licensing, import-export rules, or other policies. Such changes can affect a firm’s costs, investment plans, and profits. Clear regulations and stable policies reduce political risk rather than increase it. Exam tip: link political risk with policy uncertainty and the possible impact of government decisions on business.

Related tags

Business EnvironmentPolitical EnvironmentPolitical RiskGovernment PolicyClass 12 Business StudiesBusiness StudiesClass 12 Mcq

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