Political risk lingers as key concern in 2018

Political risk will remain a key area of concern in 2018 for multinational businesses, according to Marsh reports.

Marsh’s 2018 Political Risk Map, based on data from BMI Research, highlights that the drivers for this concern include the North Korea missile crisis, ongoing Brexit negotiations, and trade protectionism.

Marsh global practice leader, credit specialties, Evan Freely said: “Social instability, adverse government actions, and terrorist threats are among the most common political risks that multinational organisations now face when trading or investing in foreign countries.”

BMI Research outlined that North Korea tended to use important anniversaries to conduct missile tests and this would continue into 2018.

Also, according to the Marsh report: “The UK’s negotiations to exit the European Union continue to loom over the region’s political risk landscape. As talks continue, the risk that the UK will leave without a deal becomes greater, and companies may need to prepare for such an eventuality.”

Trade protectionism continues to grow globally, with the US in line to feel the brunt of restrictions.

While the African region saw some of the biggest improvements in political risk scores in 2018, the Political Risk Map shows it is still the region with the most unstable nations. Uncertainty around elections and successions have led to sharp increases in political risk in Kenya, Gabon, and Cote d’Ivoire.

On the other hand, the threat of Islamic State (IS) in the Middle East has subsided in recent months, despite the fact that conflicts remain. According to Marsh, BMI Research raised Syria’s STPRI from 22.9 to 27.9 as President Assad’s government regained territory from rebels and IS is considered less of a threat.

Freely added: “While political risks are often not directly controllable in this complex and ever-changing environment, in many instances they can be mitigated through credit and political risk insurance, providing greater confidence in the benefits of these opportunities in potentially unstable areas of the world.”