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Contemporary Political Risk Analysis: Making Sense of Competing Approaches

Thu, November 9, 1:00 to 2:45pm, Marriott Downtown Chicago, Floor: 5th, Chicago Ballroom D

Abstract

The desire to calculate risk and uncertainty for nation-states has become more urgent in the last few years (Bouchet et al., 2003) as governments and businesses seek to minimize their exposure to risk in an increasingly complex geo-political and business environment (Jakobsen, 2010). Hence the purpose of political risk analysis is to provide companies and investors with specific information on the potential for profitability of their investments and business opportunities abroad. Foreign investments are subject to the operational rules and political-economic environments of sovereign states (Brink, 2004), and political risk analysis (PRA) is thus concerned with the perception and measurement of political continuity and stability in given markets and, perhaps more importantly, institutions. Certain legislation, policies, or conditions in a given country, that are spurred by socio-political and economic issues, can have drastic effects on the profitability of business investments therein (Zonis et al., 2011; Howell and Chaddick, 1994; Meldrum, 2000, Campisi & Sottilotta, 2016). This paper uses a historical and qualitative approach to unpack the ways in which political risks are determined by various private and public risk practitioners (political-economic risk weighting/methodologies) based on primary fieldwork (2015-16), and hypothesizes on what they actually represent in both the theoretical and applied senses. It proposes a perspective on political risk factors which appreciates diversity in types of economies/governance for political risk, and advances the benefits of criteria-based approaches to risk assessments that are employed for other case studies.

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