Uncertainty about changes in governmental rules and regulations is known as what type of risk?

Uncertainty about changes in governmental rules and regulations is classified as political risk. This type of risk stems from the potential for governmental actions or changes in policies that can impact an organization’s operations or profitability. Political risk encompasses various factors, including government instability, changes in legislation, and regulatory modifications that may affect business conduct.

This understanding is crucial, particularly for businesses that operate across different jurisdictions where the regulatory environment can vary significantly. For instance, a company may invest heavily in a specific country, only to face new laws that alter the competitive landscape or impose additional costs. As a result, political risk requires careful monitoring and assessment as part of a comprehensive risk management strategy.

Other options, while related to risk management, do not specifically address the influence of governmental policies. Operational risk pertains to failures in internal processes or systems, financial risk focuses on the monetary aspects of a business, and compliance risk relates to adhering to established laws and regulations rather than the uncertainty of changes in those laws themselves. Thus, the most fitting classification for the described uncertainty is political risk.