ABSTRACT
This chapter addresses the relationship between business sector and relevant types of risk and the concept of risk tolerance. It examines the sources of political risk in a volatile environment and the different levels of political risk in terms of geographic scope. Risks faced by a company depend to an extent on the business sector a firm competes in. This is a useful starting point in defining the broad types of risk relevant to specific business contexts. Risk tolerance is a factor of the competitiveness of the business sector – the more intense the competition and the higher the stakes, the higher the willingness to take risks. There are three broad sources of risk: political instability, weak governance and conflict. The consideration in developing hypotheses of political risk relevant to one's context is the level of analysis. There are three: global, country and operational.
