Simon Coote Deputy Director of Advisory
Geopolitical tensions create significant increase in political risk losses up from 2017
Willis Towers Watson and Oxford Analytica launched their Annual Political Risk Survey Report outlining the increasing frequency and losses caused by political risk at the Global Horizons Conference on Thursday, September 20, 2018.
According to a survey from Willis Towers Watson and Oxford Analytica, increasing geopolitical concerns are causing a rise in political risk exposures with 55 percent of global organisations with revenues greater than $1 billion experiencing at least one political risk loss exceeding $100 million in value.
In addition, the survey revealed that the political risk implications of emerging market economic crises are increasing, reflecting the market reaction to a flare up in emerging markets – most notably in places like Turkey and Argentina.
In their annual Political Risk Survey, Willis Towers Watson and Oxford Analytica conducted interviews with senior executives of 40 leading global firms across different industry sectors to determine their response to ongoing global political volatility.
It is clear from our findings that political risk has increased significantly, now becoming a reoccurring and material cost of doing business. If these levels remain elevated, the need to acknowledge these losses and disclose mitigation strategies will be crucial.Paul Davidson, Chairman and Chief Executive Officer, Willis Towers Watson Financial Solutions
Companies typically grew up managing cyclical economic risks, not political. However, with the recognition of rising losses to political risk, it can no longer be excluded from executive decision-making. To better mitigate political risk exposure, companies need to reframe how they operate. Political risk must become a requirement to do business, not simply regarded as an inevitable cost of operating in challenging environments.Simon Coote, Deputy Director of Advisory, Oxford Analytica
Following the 2017 survey, we have expanded our study to include a formal survey of 40 leading companies, backed by in-depth follow-up interviews with 10 of the participants. The majority were Forbes Global 500 companies. The firms represented a cross section of industries including food and beverages, oil and gas, mining, pharmaceuticals, real estate, automobiles, and utilities. 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.
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