Integrating political risk into enterprise risk management

The interrelation and interdependencies of global markets will continue to increase. Businesses that reach for new manufacturing and sales opportunities in countries far from their home base and experience are truly at the forefront of globalisation. While many companies have developed metrics that estimate how their profitability might be impacted under varying financial scenarios, most have struggled to find a comparative and rigorous means of incorporating the range of outcomes that might arise from the political risk inherent in their international business activities.

Political risk relates to the preferences of political leaders, parties, and factions, as well as their capacity to execute their stated policies when confronted with internal and external challenges. Changes in the regulatory environment, local attitudes to corporate governance, reaction to international competition, labour laws, and withholding and other taxes, to name but a few, may all be influenced by hard to discern shifts in the political landscape. PwC and Eurasia Group have brought together a team of experts to build a Political Risk Assessment (PRA) diagnostic and monitoring methodology that enables companies to isolate and assess the contribution of political risk to their overall risk profile, manage these risks, and identify and capitalise on unexploited opportunities.