Political risks are those associated with government policies and practices. Political parties have platforms, which provide a basis of a candidate's perspectives of current issues. Examples could be the amount of protectionism directed towards imported goods and services or a government's desire for increased political stability. Special interest groups, organized labor groups, and others desiring influence and power influence political risks. The extent of corruption tolerated and government regulations impacting the local business environment contribute to a country's political risks.
Governments sometimes encourage the purchase of only domestically produced goods and services.
To maximize consumption of domestic goods, governments legislate trade barriers to discriminate against foreign providers of goods and services. Major political risks include confiscation, expropriation and domestication . Of these three, domestication is becoming increasingly prominent in our global economy. The overall goal of domestication is to empower locals into decision making positions to maintain managerial control and to ensure a long-term presence in the local economy. Issues of nationalism also surface with the increasing frequency of domestication in some countries.