Political risk refers to the potential for losses or negative impacts on investments due to changes in a country's political environment. This can include factors such as government instability, changes in laws or regulations, and civil unrest. Businesses operating in foreign markets often assess political risk to understand how these factors might affect their operations and profitability. Investors and companies may use various strategies to mitigate political risk, such as diversifying their investments across different countries or purchasing political risk insurance. Understanding the political landscape is crucial for making informed decisions in international business and finance, especially in regions with volatile political climates.