Emerging economies in Eastern Europe, South America, Africa and Asia offer a range of investment opportunities that are particularly attractive at a time when more developed economies are in slow growth, or no growth, cycles. As private equity firms, middle market companies and others look to opportunities for growth in these new markets, they need to evaluate and address political risk.
Political risk is the risk of losses to companies and investors arising out of adverse political developments in foreign countries where the companies and investors have invested in projects and businesses. Losses can be caused by political violence, such as revolution, civil unrest, terrorism or war; confiscation of assets by governments; wrongful calling of letters of credit; and business interruption. (For more on cross-border dealmaking in emerging markets, see the July 2013 cover story "10 Emerging Markets to Watch.")