Political Risk Survey Report 2019

Geopolitical tensions create significant increase in political risk losses.

Willis Towers Watson and Oxford Analytica have launched their Annual Political Risk Survey Report outlining the increasing frequency and losses caused by political risk. 

Will 2019 be seen as a turning point? In recent years, companies have faced escalating political pressures, from trade wars to anti-elite populism.

According to a survey from Willis Towers Watson and Oxford Analytica, 68% of companies have suffered a political risk loss across 37 countries. For the companies in our sample who reported an expropriation loss, 75% reported a loss greater than $250 million.

In addition, 2019 witnessed what may well be the beginning of an increasingly proactive corporate response. For instance, the Business Roundtable made the dramatic announcement, signed by more than 180 CEOs, that businesses should serve society’s broader stakeholders – including employees and local communities – rather than just shareholders.

 A number of the participants in this year’s study believed that such initiatives were crucial to addressing political risk.

Other key survey findings

  • Political risk related losses increased for political violence or forced abandonment to 54% (up from 48% in 2018), trade sanctions or import/export embargo to 46% (up from 40% in 2018), and expropriation or creeping expropriation to 29% (up from 25% in 2018).

  • Looking ahead, among 10 identified risks, the biggest perceived risks for corporations in 2020 are US-China strategic competition, Middle East regional stability, populism and nationalism, and an ESG shock.

  • While Venezuela, Zimbabwe, Iran and Angola were most frequently cited as countries where losses occurred, losses were recognised in 37 countries throughout Europe, North and South America, Asia, Africa and the Middle East.

  • 71% of respondents reported that their company’s emphasis on political risk management had increased since 2018, with 61% believing that political risk levels have increased during the same period.

 

Methodological note

As with last year’s study, we have combined a survey of 41 major corporations with in-depth follow-up interviews with a panel of ten participants. The majority were Forbes Global 500 companies. The firms represented a cross section of industries including aerospace, agriculture, food and beverages, transport, oil and gas, mining, retail, and manufacturing. The companies are mainly headquartered in North America, Europe and Japan and have extensive global operations, including in “risky” regions. This sample should not be seen as representative of companies worldwide, but rather of a leading group of firms that both face significant political risk exposure and invest significantly in political risk management.