Political risk refers to the uncertainty and potential losses investors may face due to political events or decisions in a country. Factors such as changes in government, civil unrest, regulatory changes, or economic instability can significantly affect investment outcomes. Higher political risk can lead to capital flight, as investors seek more stable environments. Consequently, international investors often conduct thorough risk assessments before committing resources to foreign markets. Understanding political risk enables investors to develop strategies to mitigate potential losses, which may include diversifying their portfolios or employing contingency plans to safeguard their investments.