The danger/ risk that arises from the adverse effect of political events and economic variables on the cash flows of a company operating in a specific country. In this respect, country risk is more comprehensive than political risk because it takes into consideration both political and economic risks (actually, political risk is a component of country risk). This type of risk is of a particular importance to companies doing business in countries around the globe, as it affects their capital budgeting analysis, and therefore their fortunes outside homeland.