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Government risk

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Title: Government risk  
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Subject: Investment Canada Act, Financial risk
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Government risk

Government risk is an investment 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, credit 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" 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
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