Political Risk a Major Concern for Multinational Businesses in 2018
According to a paper by Marsh, a global leader in insurance broking and innovative risk management solutions, political risk will remain a major concern for multinational businesses in 2018, driven by events including the North Korea missile crisis, ongoing Brexit negotiations, and trade protectionism.
Marsh’s 2018 Political Risk Map is based on data from BMI Research, a leading source of independent political, macroeconomic, financial, and industry risk analysis. This interactive map rates countries on the basis of political and economic stability and gives insight into where risks are most likely to emerge. The map can be used to help multinationals make more informed decisions about how to deploy their financial resources in the year ahead.
Key findings of the 2018 Political Risk Map include:
- Several Latin American countries - including Brazil, Colombia, Mexico, Paraguay, and Venezuela - will hold presidential and legislative elections in 2018, which has led to a deterioration in their short-term political risk scores (STPRI).
- The African region saw some of the biggest improvements in political risk scores in 2018, although uncertainty around elections and successions have led to sharp increases in political risk in Kenya, Gabon, and Cote d’Ivoire.
- The risk of increased global trade protectionism is a growing threat. Trade giants, such as the US, are likely to seek further restrictions in 2018, after a brief decline in such measures being implemented in 2017.
- In Europe, the UK’s negotiations to exit the European Union continue to loom over the political risk landscape, while political instability persists in Spain and Italy’s general election in March raises concerns over the rise of anti-establishment and Eurosceptic parties.
Evan Freely, Global Practice Leader, Credit Specialties, Marsh, said: “Social instability, adverse government actions, and terrorist threats are among the most common political risks that multinational organizations now face when trading or investing in foreign countries. 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.”