Companies can add to their political risk if they harm the local society in some way or damage the natural environment without fair compensation. Micro risk threatens companies within a particular industry or even smaller groups. Violent disturbances impair a company's ability to manufacture and distribute products, obtain materials and equipment, and recruit talented personnel. Terrorism and Kidnapping Terrorism aims to create fear and force change through the sudden and unpredictable destruction of life or property. Kidnapping and the taking of hostages may be used to fund a terrorist group's activities.
Expropriation is the forced transfer of assets with compensation.
Nationalization is government takeover of an entire industry. Government policy changes can also result from civil or social unrest or might represent the views of newly empowered political parties. These are regulations that require international manufacturers to use a certain amount of local resources. They let governments force international companies to foster local business activity and ease regional or national unemployment. Companies must try to manage political risks that threaten current operations and future earnings.