Country risk relates to the likelihood that changes in the business environment will occur that reduce the

profitability of doing business in a country. These changes can adversely affect operating profits as well

Political risk is when a government will unexpectedly change its rules or ways of operation in business. It can often be determined by the stability of the government and the presence of an independent judiciary and legal system. The relationship with other countries is also very important in determining the level of political risk involved in entering a new market.