Against the backdrop of the global economic decline, investor perceptions of political risk are on the rise. Recent surveys and reports also show that most investors expect political risk to increase further over next five years. Coupled with the global economic recession, sharp declines in FDI flows and the re-emergence of “resource nationalism”, investment promotion intermediaries (IPIs) face an uphill climb to attract foreign investors.

However, powerful and innovative risk mitigation instruments in the form of political risk insurance (PRI) exist to help IPIs and their investor clients manage political risk in the calculus of investors and keep cross-border investment flowing. This article offers an overview of political risk and PRI, and suggests how IPIs can use risk mitigation instruments, such as PRI, to facilitate the investment process..

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