Macro Risk

AAA

DEFINITION of 'Macro Risk'

A type of political risk in which political actions in a host country can adversely affect all foreign operations. Macro risk can come about from events that may or may not be in the reigning government's control.

INVESTOPEDIA EXPLAINS 'Macro Risk'

For example, any company that is engaging in foreign direct investment in a country that is on the verge of switching to an anti-foreigner slanted government would be facing tremendous macro risk, because the government is likely to expropriate any and all foreign operations, regardless of industry.

There are many organizations that provide reports and information on the degree of political risk that a country may possess. Furthermore, companies have the opportunity to purchase political risk insurance from a variety of organizations in order to mitigate potential losses.

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Sovereign Credit Rating

    The credit rating of a country or sovereign entity. Sovereign ...
  4. Country Risk

    A collection of risks associated with investing in a foreign ...
  5. Political Risk

    The risk that an investment's returns could suffer as a result ...
  6. Risk

    The chance that an investment's actual return will be different ...
RELATED FAQS
  1. What is political risk and what can a multinational company do to minimize exposure?

    For multinational companies, political risk refers to the risk that a host country will make political decisions that will ... Read Full Answer >>
  2. What financial ratios are most useful for an investor to evaluate the liquidity of ...

    An insurance company, like any other nonfinancial company, needs access to liquidity in case it needs to fulfill its debt ... Read Full Answer >>
  3. What are some risks a company takes when entering a currency swap?

    Currency swaps are commonly used to hedge loan transactions. Often, an American company and a foreign company exchange the ... Read Full Answer >>
  4. What economic indicators are important to monitor when investing in the insurance ...

    Inflation and interest rates are the best economic indicators to monitor when investing in the insurance sector. Unlike with ... Read Full Answer >>
  5. Why do some companies in the insurance sector engage in reinsurance?

    Some companies in the insurance sector engage in reinsurance because they want to reduce risk. Reinsurance is basically insurance ... Read Full Answer >>
  6. Why is the insurance sector considered a low-risk investment?

    Historically, the insurance sector has enjoyed modest returns and perceived safety. It's been a favorite for investors who ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  2. Brokers

    Tips For When To Buy, Sell Or Hold

    Knowing how to make sound snap decisions is a must for any broker.
  3. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  4. Professionals

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  5. Insurance

    India's Two-Child Policy

    As of 2014, 11 Indian states have passed laws to restrict Indian citizens from having no more than two children.
  6. Fundamental Analysis

    Can You Invest in China's Huawei?

    Have you heard of giant Chinese telecom maker Huawei? Here's what you need to know.
  7. Economics

    What Does Asymmetric Information Mean?

    Asymmetric information describes a situation where one party in a transaction knows more than the other.
  8. Fundamental Analysis

    How to Calculate a Combined Ratio

    Combined ratio is a formula used in the insurance industry to measure the performance of an insurance company.
  9. Investing

    Too Late To Invest In EM?

    Investors have flocked to developing markets amid continued low U.S. interest rates & hopes of further economic stimulus from emerging world central banks.
  10. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center