Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

Political risk refers to the potential challenges and uncertainties that companies face due to changes in the political environment within a country. This encompasses various factors, most notably the likelihood that legislative actions could alter the regulatory landscape, affect taxation, or impose restrictions that hinder a company's operational and strategic goals. For instance, new regulations could increase compliance costs or limit market access, directly influencing profitability and sustainability.

Natural disasters primarily relate to environmental risks rather than political ones and do not usually fall under the umbrella of political risk. Similarly, although foreign exchange rate volatility is a significant financial risk for businesses, it is typically categorized under economic risk rather than political risk. Market competition also represents a strategic concern but does not pertain to the influence of political factors on a company's operations or decision-making. This distinction underscores why the risks stemming from legislative actions are integral to understanding and navigating political risk in the business landscape.