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Marsh: Political Risks Bring Unprecedented Uncertainty

Political Risk
February 27, 2019

According to the latest report from Marsh, titled Political Risk Map 2019, rising geopolitical tensions and protectionist sentiments, coupled with ongoing trade disputes, are leading to increased uncertainty and risk for multinationals with direct foreign investments.

Marsh said the interactive map rates more than 200 countries and territories on the basis of short- and long-term political, economic, and operational 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, according to Marsh.

Key Political Risk Map 2019 findings include the following.

  • A transition to a more multipolar world order of protectionism is likely to continue in 2019, with isolationist and protectionist sentiments and practices rising in some countries, halting, at least momentarily, the process of globalization. 
  • Trade tariffs and geopolitical disputes between the United States and China could escalate in 2019, bringing the risk of further Chinese retaliation and US counterretaliation. Export heavy economies, like Germany, are likely to be impacted. 
  • Russia's relations with the West will remain tense in 2019 and could result in further sanctions on Russia. 
  • The United Kingdom's negotiations to exit the European Union continue to loom over the political risk landscape, while continued political instability in Spain led to a sharp decline in the country's short-term political risk index (STPRI).
  • Positive results from 2018 presidential and legislative elections in Guatemala, Chile, and Paraguay led to improved STPRI in those countries, while continued political unrest in Nicaragua significantly reduced the country's STPRI. 
  • The African region once again saw some of the biggest improvements in political risk and also some of the most notable deteriorations. STPRI scores in South Africa, Mozambique, and South Sudan all improved, while uncertainty around elections and deteriorating economic and humanitarian conditions have led to sharp increases in political risk in Zambia, Mali, Algeria, Tunisia, Cameroon, and the Central African Republic.

"Businesses with direct foreign investments are facing an unprecedented breadth of challenges today from emerging economies to so-called developed economies," said Evan Freely, global practice leader, Credit Specialties, Marsh. "In uncertain times, vigilance and broad, systemic risk analysis coupled with political and trade credit insurance, will be vital to minimizing these threats."

Marsh said that findings from its report are similar to the World Economic Forum's Global Risks Report 2019, which ranked rising geopolitical and geo-economic tensions as the most urgent risk in 2019.

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