What is ‘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.
Explaining ‘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.
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- Variable rare disasters: An exactly solved framework for ten puzzles in macro-finance – academic.oup.com [PDF]