Macro Risk

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.

BREAKING DOWN '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. Micro Risk

    A type of political risk that refers to political actions in ...
  2. Political Risk Insurance

    Coverage that provides financial protection to investors, financial ...
  3. Political Risk

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

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

    The study and use of how economic theory and methods influences ...
  6. Political Arbitrage Activity

    An arbitrage activity that involves trading securities based ...
Related Articles
  1. Economics

    How to Invest In Developing Markets

    Developing markets can be attractive additions to many investor's portfolios, but carry additional risks that must be considered.
  2. Options & Futures

    Evaluating Country Risk For International Investing

    Investing overseas begins with determining the risk of the country's investment climate.
  3. Economics

    What's a Political Economy?

    Economics and politics are intrinsically linked. An economy is frequently one of the biggest points of contention between different political parties. And a political party’s ideologies will ...
  4. Term

    What is the Macro Environment?

    The macro environment is the conditions existing in an economy as a whole, rather than in a single sector or region.
  5. Retirement

    Risk and Diversification: Different Types of Risk

    Let's take a look at the two basic types of risk: Systematic Risk - Systematic risk influences a large number of assets. A significant political event, for example, could affect several of the ...
  6. Investing

    Impact Investing Funds: What are the Risks?

    Impact investing funds can carry risks unique to this asset class, including political risk, currency risk and exit risk.
  7. Investing News

    Evaluating Country Risk When Investing

    The main risks of investing overseas are economic and political.
  8. Professionals

    The Risk Premium

    CFA Level 1 - The Risk Premium. This topic covers risk premium, which is a component of required rate of return. Examines business, financial, liquidity and political risk.
  9. Professionals

    Risk Management Framework (RMF): An Overview

    A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage and limit, those risks.
  10. Professionals

    Types of Investment Risks

    FINRA Series 6: Section 9 Types of Investment Risks. This section explains different types of risks, exchange rate risk, Interest Rate Risk, Business Risk, Credit Risk, Taxability Risk, call ...
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 Answer >>
  2. What is the difference between market risk and country risk?

    Learn about market risk and country risk, some examples of each and the main difference between these two types of risks. Read Answer >>
  3. What risks do organizations face when engaging in international finance activities?

    When an organization decides to engage in international financing activities, they also take on additional risk as well as ... Read Answer >>
  4. What does it mean when a country has little activity in its capital account?

    Know what a country's capital account represents and understand what the implications are if a country has little activity ... Read Answer >>
  5. How risky is it to invest in metals and mining companies with operations in politically ...

    Learn about a number of risk factors such as tax policies and changes in fees that can affect a mining company operating ... Read Answer >>
  6. How do businesses decide whether to do FDI via green field investments or acquisitions?

    When businesses decide to expand their operations to another country, one of the more important dilemmas they can face is ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center