Measuring Risk for Foreign Direct Investment Research in the Middle East and North Africa: A Transparent Protocol for Proxy Selection and Robustness

Security-related risks to foreign investors in the Middle East and North Africa are commonly measured through heterogeneous proxies that are often treated as interchangeable. This paper examines how proxy choice affects the estimated relationship between security-related risk and foreign direct investment. It develops a taxonomy of three proxy families, governance/perception-based risk, realized-conflict risk, and text-based geopolitical risk/salience, and proposes a transparent protocol for selecting, reporting, and triangulating risk proxies in empirical foreign direct investment research. A brief empirical illustration applies a constant country-year fixed-effects specification to a MENA panel for 2003–2023, re-estimating the same model with alternative lagged and standardized risk proxies. The results show that all estimated risk coefficients are negative, but their magnitude and statistical precision differ substantially across proxy families. The realized-conflict proxy yields the sharpest association with foreign direct investment inflows, while the governance/perception-based and text-based proxies are not statistically significant in the reported specifications. The paper does not claim to identify a causal effect of risk on FDI. Rather, it shows that empirical conclusions about the risk–FDI relationship are sensitive to the choice of proxies. The article therefore proposes a low-friction reporting standard intended to reduce ad hoc measurement choices, improve replicability, and make proxy sensitivity more visible in FDI research.