It was not so long ago that managing political risk had a primarily developing world connotation, referring to those ‘other’ countries half a world away, where poverty, coups and corruption are the rule. An entire industry sprang up around the notion that there was a marketplace for information and insurance directly related to understanding cross-border risk in the (primarily) southern hemisphere. The political risk ‘industry’ is indeed a thriving marketplace today – a multi-billion-dollar business focused on delivering real time information to banks, insurance companies, corporates and governments, as well as a means to protect their interests in the countries deemed to be most at risk.
Or, that was the case until the new millennium, when a combination of the advent of climate change, social media, the Arab Awakening, economic nationalism, developed country political hubris, terrorism, cross-border conflict, and cyber-risk combined to transform the world into a cauldron of competing vortexes, the likes of which has not been seen before. The global landscape today is characterized by a clash between man-made and natural risks, which are butting heads on a seemingly continuous basis. It is also being buffeted by a self-destructive form of political change that is compounding the severity that any one of these forces would have on their own.
Nationalism, demagoguery, and self-interest are hardly new variables in determining how political forces coalesce to select leaders; what is new are the implications in a globalized and intimately interconnected world. Caustic and acerbic leaders such as the Philippines’ Duterte have a profound impact on trade and investment landscapes. The Philippine stock market and foreign direct investment levels have seen significant declines since he took office less than three months ago. The same may be said of the UK’s Foreign Minister – BoJo -who hasn’t exactly set Europeans’ minds at ease as he hurls names and epithets around. Since the UK decided to Brexit, the British pound has fallen as much as 15 percent against the U.S. dollar. Then there is the prospect of a Trump presidency in the U.S., which has higher odds at the present time than ever before. The global implications are staggering.