How does Risk Management Affect Foreign Investment Returns in Albania

Abstract

International investments constitute a key component for Albania’s economic development, bringing capital, technology and expertise. However, the returns from these investments are significantly influenced by risk management, which includes economic, political, regulatory and financial risks. This study analyzes the role of risk management in ensuring sustainable returns and maximizing benefits for foreign investors in Albania. Using an empirical approach, the study examines data from the period 2015-2024 to analyze the impact of factors such as political stability, changes in the legal and fiscal framework, as well as the performance of key investment sectors, including energy, infrastructure and real estate. Furthermore, the study explores risk protection mechanisms, such as investment insurance, international investor protection agreements and the use of diversification strategies. The findings show that effective risk management directly affects the stability and growth of international investment returns. Investors who implement advanced risk management strategies, such as careful market analysis and partnerships with local institutions, manage to minimize uncertainties and secure higher returns. On the other hand, lack of transparency and political instability can reduce Albania’s attractiveness as an investment destination. This study provides recommendations for policymakers and investors on risk management strategies and ways to increase the safety and profitability of international investments in Albania.