People all around the world are demanding greater participation in the political process, and many nations are abandoning totalitarian for democratic systems. Almost all of the formerly communist countries of Central and Eastern Europe now have some form of democratic government. Political risk is the likelihood that a government or society will undergo political changes that negatively affect local business activity. It can threaten the market of an exporter, the production facilities of a manufacturer, and the ability to repatriate profits. 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.