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Marsh’s Political Risk Report 2023

Report shows four trends are driving political and economic risk: persistent political instability, economic retrenchment, competition for strategic resources, and supply chain diversification.

Against a backdrop of major economic headwinds and increased geopolitical instability, many governments are taking measures that focus on national economic security. Such measures could have far-reaching global consequences and compound the impact of various risks. The compounding effect is what the Global Risks Report 2023 calls “polycrises” that will test resiliency at global, country, and business levels.

Today’s economic and political landscape is complex and volatile, yet there are opportunities. Greater competition could spur innovation and accelerate the transition to a low-carbon economy, while countries with substantial resource wealth could benefit economically.

Persistent political instability

The ability of countries to attract foreign direct investment (FDI) and use it effectively is often dependent on political stability. Marsh’s risk ratings show that the risk of war and terrorism in several regions remains high and could threaten investment returns. Meanwhile, several emerging economies may find it harder to cope with high inflation and borrowing costs in 2023, which could potentially increase the risk of political instability and social unrest.

Economic retrenchment

Governments are expected to continue to prioritize economic security and national resilience. Export controls on necessities such as fertilizers and semiconductors, and government measures to boost domestic green investment, could have both unintended and intentional consequences on the security of other countries.

Competition for strategic resources

In the transition to a low-carbon economy, critical minerals bring new risks and opportunities. A shift in resource-rich countries mining profile to minerals and metals for green energy production could lead to future wealth if managed correctly. As momentum and investment in the energy transition pick up, the insurance industry has an opportunity and responsibility to help de-risk the development of, and investment in, the green energy lifecycle.

Supply chain diversification

Risk events have firmly put global supply chains in the spotlight, from trade disputes, to natural disasters, to inflationary pressures, and more. Supply chain diversification brings opportunities to build resilience into supply chain strategies. One example is many companies’ shift to the Middle Corridor trade route, linking China to Türkiye.

If you have any questions about this report and what it means for your own approach to political risk, please email us or contact your Marsh representative.

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Kyle Williams

Head of Political Risk and Structured Credit - Pacific

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