Government risk is an investment

Investment

Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

 term used to collectively describe the impact of prospective changes in legislation, policies of the executive branch within existing legislation, and corruption.

It is typically referenced as distinct from other forms of risk, such as market risk

Market risk

Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices...

, credit risk

Credit risk

Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. Such an event is called a default. Other terms for credit risk are default risk and counterparty risk....

, price risk, and natural risk when assessing the viability of an investment project.

Distinction from Country Risk

It is often confused with the term "country risk

Country risk

Country risk refers to the risk of investing in a country, dependent on changes in the business environment that may adversely affect operating profits or the value of assets in a specific country...

" when assessing investments in foreign countries, but government risk is in fact a subset of country risk. Specifically, government risk refers only to interactions with government, but not the following elements of country risk:

• crime and property security
• currency risk
• different cultural norms around business ethics
• monopolies or business conglomerate power within in-country markets