Political Risk Report

Report shows four trends 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 of related global risks is what the Global Risks Report 2023 calls “polycrises” that will test resiliency at the global, country, and business levels.

While today’s political and economic landscape is complex and volatile environment, there are opportunities for growth. 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. Our/Marsh’s political risk ratings show that the risk of war and terrorism in several regions remains high and could threaten investment returns. Meanwhile, several emerging economies could find it harder to cope with high inflation and borrowing costs, potentially increasing 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 lower-carbon economy, critical minerals bring new risks and opportunities to energy security. A shift in resource-rich countries from mining to minerals and metals for green energy production could lead to future wealth if managed correctly. As momentum and investment in the clean energy transition pick up, the insurance industry has an opportunity and responsibility to help de-risk the energy transition across metals, mining, minerals, and other related sectors.

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 will bring opportunities for those who can build resilience into their supply chain strategy. One example is the Middle Corridor trade route, linking China to Türkiye.

If you have questions about this report or related issues, please email us or contact your Marsh representative.

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