Assessment On The Level Of Political Risk In Foreign Direct Investment A Case Of Foreign Direct Investors Located In Addis Ababa And Surrounding Areas

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Addis Ababa University


The study was conducted to Assess the level of political risk in foreign direct investment with a case study on foreign direct investors located in Addis Ababa and its surrounding area .The study tried to level/rank the different political risk factors MNCs are facing, Mitigation tools used and Risk management capability of the firms with overview on current unrest challenges faced. Questioners and an interview were conducted to assess the level with structured purposive sampling .The key finding of the study is that firms on the study have underestimated the extent of damage that political risk can cause to their Investment as and have been affected by the recent unrest in the country and while majority of the investors have a risk management department dedicated for risk monitoring ;they were low in implementing of existing political risk mitigation and week in evaluating new political risk mitigation strategies and in assigning roles and responsibilities for political risk management .They worry that Civil disturbance ,Transfer and convertibility restriction and adverse regulatory change might affect their future investment . It is obvious that political risk need to be given a prior attention for firms investing with proper risk risk monitoring ,Since Foreign direct investment is subject to a far wider range of political Risks it Should be managed with proper risk management strategy and if not managed by different mitigation mechanism it could affect the entire investment as can be seen from the recent Political Crises that has affected various foreign Investors .Political Risk Mitigation tools that are available for the investors and those that the investors think are effective for their firm at times may be different and Political Risk is not just any business risk that would be left for the management of the investors only , but big support need to come from the host nation and Ethiopian Investment need to work greatly beyond what is written in the proclamation and post risk damage compensation .



Foreign Direct Investment, Political Risk, investors only