Getting a handle on political risk

 You need the Adobe Flash Player to view this video. Get Adobe Flash.

Interview by Gene Zasadinski

At first glance, politics and business seem strange bedfellows. Each answers to different constituents and each focuses on dissimilar short-term objectives and long-term goals. Yet in an increasingly non-polar global business environment, politics are more important than ever before. By assessing and reporting on political risk, Ian Bremmer helps clients hoping to succeed in a brave new world where politics matter very much indeed. In the following interview, he shares his insights and perspectives on how to turn awareness of political risk into business opportunity.

GZ: In your view, how do politics affect markets, and why does it matter?

IB: Politics affect markets in all sorts of ways. In the past, if you were thinking about doing business globally, you needed to understand economics and how business works. Today, politics are increasingly important to market outcomes. Political risk is all about understanding that governments and businesses have different motivations, expectations, and goals. While the outcomes of government decisions may be perfectly rational in terms of politics, they are often inefficient and suboptimal with respect to economics and markets. In other words, to operate a global business successfully, you need to understand what motivates governments, particularly those in increasingly important emerging markets where politics matter at least as much as economics.

GZ: Over time, will this understanding become more or less important?

IB: More. And the reasons why are clear. First, energy is increasingly coming from unstable parts of the world. Second, emerging markets are, more and more, driving global growth. Third, dangerous technologies are becoming more accessible to rogue states and organizations. And fourth, the United States increasingly has neither the will nor the ability to provide leadership on a wide range of global issues. But don't misunderstand me. We're not moving from a unipolar to a multipolar world where today's power brokers give way to new centers of influence. We're moving from a unipolar to a non-polar world that is increasingly volatile. In such a world, investors and executives must understand the political upsides and downsides of the countries in which they want to do business.