Political Environment Tourism is the second largest growing business area after information technology in the global economy. Many of the economies are successful in marketing their country and destinations and generating a substantial amount of foreign exchange from tourism Sector. Even countries with poor level of infrastructure and facilities are able to attract investors to invest money in their country for tourism promotion. Tourism marketing is a very complex phenomenon because the number of uncontrollable factors is more than the number of marketing mix variables. Though the conventional marketing wisdom says that the larger political factors affect the marketing offer in product marketing but it is more prominent in the case of tourism. The political upspring, terrorism, religious fundamentalism, level of crime perception by the foreign tourist affects the prospects of a destination. Sri Lanka is also facing a down turn in the tourism business due to the above reasons. The factors of low per capita tourist investment sustained effort for tourism marketing by the developing countries have become secondary today. The tourism business is largely governed by the non-marketing factors than pure business propositions in South Asia. The geo political developments and the kind of social background have largely affected the perception of the foreign tourists negatively for which the inbound traffic is in a down turn. The decision to establish or maintain a direct investment position abroad necessitates addressing the issue of risk that confronts multinational firms. In the examination of any foreign direct or indirect investment opportunity, the environment encompasses numerous areas of concern for the investing firm. One of the main functions of risk analysis is to determine when and how economic and non- economic factors can affect the foreign investment climate in a particular country, given that risk is a direct outcome of the political and non-political realities faced by international business. Furthermore, this activity is even more crucial in the current global marketplace, given the increasingly complex and uncertain environmental conditions faced by international tourism promoters, particularly to developing countries.