Methods of Political Risk Analysis

Political risks are strategic risks which result from the interplay of influential actors. This understanding has far reaching consequences for the methods we apply to analysing political risks. Given that the outcome of a client’s projects and enterprises may depend upon the political actions of relevant partners and competitors, the early warning of political risks requires intelligence regarding relevant interests involved. Therefore, we focus on the motivations, intentions, options and moves of key stakeholders with respect to specific issues as a prerequisite for assessing the likely outcome of political risk scenarios.

Our Political Risk Analysis Tool identifies the major issues which might affect a client’s operation and then employs a unique combination of forecasting methods to ascertain how these issues might evolve. The issues-based approach allows for including relevant geo-political risk on the international level, macro-political risk on the country and sector level as well as micro-political risk on the local and project level. It accounts for the preferences of the relevant stakeholders, including influential external and internal actors in the political, business and social sphere. Moreover it takes into consideration in how far issues and actors’ strategic preferences are interconnected.

Depending on the stage and level of engagement, the client will be a stakeholder too, having an impact on the political environment and taking part in the strategic interactions which determine the outlook of projects and investments.

Based on concrete risk scenarios from the client’s perspective, we analyse if relevant issues will likely play out in a cooperative manner, leading to resolution of the issues, or in a more confrontational manner, leading to disputes which will harm the client’s interests. Apart from learning more about the preferences and power resources of prospective partners and opponents, the client can use these insights to take political risk mitigations measures which can positively influence the cooperative resolution of critical issues.