The political climate in Thailand will remain highly volatile given the polarisation between red and yellow shirts, according to a report by BMI Research.
There is a risk of renewed political instability that poses a salient risk to investors and businesses.
In addition, the insurgency in southern Thailand is also a threat, the unit of Fitch group said in a report entitled "Political Risk Analysis: Political Risk to Investing in Thailand".
The political climate will remain highly volatile, and businesses and investors will suffer from renewed instability and the policy uncertainty that comes with it.
The biggest source of instability has been the entrenched political divide between supporters and opponents of ousted prime minister Thaksin Shinawatra, who have styled themselves red shirts and yellow shirts, respectively.
Irreconcilable political interests of the two factions suggest that the gulf between them is simply too wide to be bridged in the near term, and there is thus a risk of renewed political instability in the coming years, the report said.
Frequent changes of government in Thailand have greatly affected policymaking continuity and created a huge element of uncertainty, particularly for companies with long-term investment plans.
The draft constitution that has been written by the 36-member Constitution Drafting Committee also includes provisions that will seek to dilute the power of future governments, the report said.
With the polarisation between red and yellow shirts likely to remain even if the country were to return to an elected government, elected governments may last only a few years, and a well-functioning democracy is far from assured.
"Both our short-term and long-term political risk indices therefore stand at 57.9 and 59.8 out of 100, respectively, underperforming the regional averages of 69.7 and 63 and reflecting the highly polarised nature of domestic politics in the country," BMI Research said.
"While political risks attached to investing in Thailand are high, there are still investment opportunities in the country."
Terror attacks by separatist groups in the Deep South's three Muslim-majority provinces of Pattani, Narathiwat and Yala in a bid to achieve independence also remain a major threat to investors.
The insurgency dates from 2004 and has claimed more than 5,300 lives.
The unrest has so far been contained to the South, but a risk remains that the insurgency will result in terror attacks in tourist areas, perhaps even in the capital of Bangkok itself.