Abstract

Political risk concerns the profits and investment plans of international business (MNCs, FDI). The Social Dimensions of Political Risk – SDPR is an unchartered territory of political risk. Consequently, on the basis of the analysis of theories of risk, political risk, systems, values and globalization the concept for SDPR is generated. This concept is based on basic assumptions: 1) society is a system whose elements are subsystems; 2) the societal subsystem is at the core of society; 3) the relation between societal subsystem and society is such as the relation element – system; 4) political risk is systemic; 5) values are axial to the system, and their carrier is the societal subsystem; 6) laws are an artificial construct that has only a value function, but is not a value; 7) the incommensurability between values and the above mentioned artificial construct generates SDPRs that are relevant to the risk for society. A formal theoretical and analytical model of SDPR and a value triangle and conceptual index of SDPR based on it are introduced. Key conclusions pertain to the following: the need for reconsider the paradigm of democracy; greater participation of the societal subsystem; need for subsystems’ mutual restraint based on the principle of authorities’ restraint.

JEL: D7, D72