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Navigating the unpredictable: Why political risk matters for businesses

Businesses tend to treat political risks as black swan events to react to rather than to prepare for. It does not have to be this way. It should not be this way.

Businesses regularly prepare for certain unlikely and unpredictable risks. For example, it is impossible to precisely predict when natural disasters will strike, but businesses still enact measures to mitigate worst-case outcomes. Infrastructure is built to withstand earthquakes, port design considers threats from climate change, generators stand ready for power outages, and so on.

Don’t treat political risk differently. Like natural disasters, political risks seldom occur without warning. Just like trends are used to identify earthquake and flooding zones, local and global trends can be used to identify how political risks will impact businesses if you know what to look for. Armed with this knowledge, leaders can strategically prepare.

It is more important than ever to prepare for political risks. Geopolitical tensions are rising. New technologies will drive economic, political, and social changes. The risk environment is rapidly changing, and how companies prepare to respond to it will make or break a company's growth trajectory.

Those that prepare for the changing world will thrive. Those that do not are at risk of being left behind.

That’s where PRISM becomes your ally. We analyze global trends and emerging risks to help your business understand how social, economic, and political trends and events will impact your business. No matter your sector or function – from supply chains to construction, to tech and beyond – we help your organization understand what risks are important and give you the insights needed to address them.

What is political risk?

Political risks are the potential threats on the horizon stemming from the local and global political, economic, and social trends around us. These risks can manifest in various ways, from regulatory changes and policy shifts to economic outlooks and geopolitical events, like civil unrest, war, and sanctions.

Whether it's a change in trade tariffs, regulations, or security levels, political risk can profoundly impact a business's ability to operate, invest, and trade. The political climate in a particular region can influence everything from market access and property rights to the availability of resources and the stability of local currencies.

Why is political risk management crucial for businesses?

Companies that operate across national borders, particularly those with investments in countries with volatile political climates, are especially vulnerable to political risk.

However, businesses operating predominantly within their home country are not immune. Domestic policy changes, political instability, or societal shifts can all impact a company's bottom line. Faraway wars can drastically impact the local economy and/or supply chains.

A robust political risk management strategy allows businesses to:

  1. Identify potential risks: A comprehensive understanding of the political landscape and potential risks enables a company to anticipate and prepare for adverse events, thereby minimizing their impacts.

  2. Mitigate potential damage: Identifying political risks allows leaders to employ strategies to mitigate their effects.

  3. Capitalize on opportunities: While such risks can pose challenges, they can also create opportunities. A company that identifies the risks ahead can ready responses that will give them a competitive advantage in a new operating environment.

Where PRISM comes in

Political risk is complex and unpredictable, and more than ever our world is increasingly noisy. Trying to parse what is important in the day-to-day barrage of news and how it will impact business operations can be overwhelming. Drowning in the daily news makes businesses near-sighted. Dealing with change this way turns risk mitigation into a high-stakes game of Whack-A-Mole and leaves leaders deprioritizing what really matters: long-term strategizing that prepares the business to thrive.

PRISM analyzes local and global trends to help businesses understand what risks matter to them. We cut out the noise so that businesses can focus on making the strategic decisions that will give them an edge over their competitors.

PRISM provides the tailored analysis that businesses need to navigate an increasingly uncertain world.

What we offer

Expertise & knowledge PRISM is well-versed in local and global political, economic, and social trends. Our global network of researchers and analysts is ready for any geography and sector.

Ongoing monitoring & reporting

PRISM continuously monitors political, economic, and social trends worldwide and cuts through the noise, delivering insights to business teams via interactive reports and regular briefings.

Risk assessment and mitigation PRISM provides businesses with risk assessments and can coordinate with leaders to tailor mitigation strategies, identify the opportunities that emerge alongside risks, and ensure that companies are prepared for any eventuality.

Want to learn more about PRISM? Visit our website or contact us today.


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