Political risk: Overview

Politics and business may at first glance seem like oil and water, answering to different constituencies and focusing on different goals. But in an increasingly non-polar world, understanding what motivates governments is more vital than ever to business outcomes.

Spurred by globalisation, companies are taking on greater international exposure than ever before. Conflict in the Middle East, terrorism, and pandemic diseases—to name but three issues—are perennial threats to the security and continuity of global business operations. At the same time, government intervention in national economies is on the rise, and incidences of business setbacks—contract renegotiation or cancellation by a host country, politically driven increases in taxation, or impromptu country exits after significant investment—are surging.

Also worrisome is the growing gap between corporations’ acceptance of political risk for economic rewards and their ability to adequately manage that risk in an effective manner.

Optimising performance regardless of economic and political climate

At PwC and Eurasia Group, know that if political risk can be anticipated, it can measured—and if it can be measured it can be managed. This principle lies at the heart of our political risk practice, and underscores its value to global organisations, now more than ever.

Here some real-world examples of political risk situations:

  • You are managing a global supply chain or offshore operation and need to analyse the country-specific forces that could impact performance results.
  • You need early warning of a potential problem or opportunity presented by political shifts—and to have in place contingency plans to protect your company from worst-case consequences.

Working with PwC

Using our deep sector knowledge and comprehensive political risk data and tools, PwC and Eurasia Group can help you:

  •  and determine your level of preparedness.
  • Examine the quality and adequacy of your existing controls and risk-mitigation plans.
  • Weigh investment and operating opportunities—and develop associated risk mitigation steps—through scenario planning.
  • Embed political risk considerations into your strategic decision-making process and ongoing operations.

About the PwC and Eurasia Group alliance

An alliance between PwC and Eurasia Group

The interrelation and interdependency of global markets continues to increase. Firms are taking on greater international exposures than ever before as they seek new markets and new sources of material, labor and capital. At the same time, the events of the past few years show us that the world is becoming a more volatile place. That volatility, which is driven by the decisions (and sometimes the shortcomings) of global leaders, creates both opportunities and risks. By increasing their ability to anticipate these decisions, firms are better able to capture global opportunities and mitigate downside risks.

To help our clients address these challenges, PwC has formed an alliance with the Eurasia Group, the world’s leading global political risk consulting firm. Eurasia Group brings in-depth country knowledge and contacts, a long term view of political risk as a predictor of economic risk and a pragmatic approach. PwC brings business process understanding in and across functions and industries, enterprise risk management framework design and implementation capabilities, and risk mitigation experience with a focus on overseas investments. We believe this combination of talents will enable our clients to drive higher quality returns to the bottom line.