Political environment in which companies operate has always been crucial for their success or failure. Changes in political environment caused by actions of a state or other political actors which in turn influences business could be viewed as political risk. Political risk represents the probability that certain political action will lead to adverse effects for companies business. International business transactions can be defined as transections, often defined by contract, between two parties from different nation states. Generally speaking any exchange of goods or value over national borders can be construed as international transaction. Influence of politics on businesses of Croatian companies abroad, particularly exports and investments, which is viewed by some economist as the only way for Croatian economy to grow, represents quite new and unexplored problem in Croatian economic science literature. There are multiple possible reasons for this, one of which can be the fact that export industry is poorly developed and that there is small number of investments made by Croatian companies in other countries. The fact that the political risk is so differently defined and hard to measure is also the reasons for it being seldom present in scientific literature. Taking into account all the knowledge amassed until now about political risk and the influence it has on international business the purpose of this doctoral dissertation is to assess the influence the political risk has on international business transactions of Croatian companies. Furthermore the thesis tries to suggest ways and means by which to manage political risk.For that purpose and using the data of exports and foreign investments of Croatian companies we conducted survey among top one hundred Croatian exporters for 2011 calendar year. Also we conducted correlation analyses between value of exports from Croatia to selected countries and the level of political risk in those countries using various risk indexes for given time period. Results of research have enabled for hypotheses to be either accepted or dismissed as well as to define the comprehensive framework for political risk management. This framework can in turn be used by Croatian companies engaged in international business transactions.