Political risk is going to be a major concern for multinational businesses this year, according to a paper published Wednesday by Marsh. Tensions will be driven by events including the North Korean missile crisis, trade protectionism and the ongoing Brexit negotiations, Marsh said.
Marsh’s 2018 Political Risk Map was compiled using data from BMI Research, an independent analyst of political, macroeconomic, financial and industry risk. Marsh rated countries on the basis of political and economic stability and projected where risks were most likely to emerge.
Key findings of the report included:
- Several Latin American countries will hold presidential and legislative elections in 2018, leading to a deterioration of their short-term political risk scores.
- The African region saw some of the biggest improvements in political risk scores in 2018. However, uncertainty regarding elections and political successions has caused political risk to spike in Kenya, Gabon and Cote ‘Ivoire.
- Global trade protectionism is “a growing threat,” according to Marsh. The company said that trade giants like the US are likely to pursue further trade restrictions this year.
- The UK’s negotiations to exit the European Union continue to affect political risk in Europe. Political instability in Spain and a March election in Italy also raise concerns about the rise of anti-establishment or “Euroskeptic” parties.
“Social instability, adverse government actions and terrorist threats are the most common political risks that multinational organizations now face when trading or investing in foreign countries,” said Evan Freely, Marsh’s global practice leader for credit specialties. “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.”