Rising Trade Tensions Threaten Political Stability: Marsh's Political Risk Map 2020
New York | March 03, 2020
Escalating trade tensions are expected to continue throughout 2020 and will result in persistent global political and economic uncertainty for multinational businesses, according to a new report from Marsh, the world’s leading insurance broker and risk adviser.
The Political Risk Map 2020, produced by Marsh JLT Specialty’s Credit Specialties Practice, is based on data from Fitch Solutions, a leading source of independent political, macroeconomic, financial, and industry risk analysis.
Findings from this year’s Political Risk Map 2020 echo the World Economic Forum’s Global Risks Report 2020, which found that economic confrontations between major powers are among the most concerning risks for 2020.
Key findings of the Political Risk Map 2020 include:
- The transition towards a multipolar world order seen in 2019 – with the associated multiple challenges to multilateralism and free trade – are expected to deepen in 2020, particularly as the US presidential election approaches in November.
- Hong Kong experienced the second largest deterioration in the short-term political risk index (STPRI) score globally – after Sudan – following months of protests that have strained its relationship with mainland China.
- Following Brexit, the UK’s negotiations over its future relationship with Europe will continue to dominate the political risk landscape in this region.
- US-Iran relations and tensions between Russia and the West are expected to continue in 2020.
- The STPRI scores for several Latin American countries – including Colombia, Chile, Ecuador, Haiti, Bolivia, and Argentina – have deteriorated as governments find it increasingly challenging to balance economic reforms and social stability. Brazil’s STPRI score improved on 2019, amid continuing investor-friendly economic reforms.
In Africa, while the STPRI scores for Guinea, Mali, and South Africa remain unchanged on 2019, upcoming elections in the region could generate political instability. Rwanda experienced the largest improvement in STPRI score in Africa, reflecting continued economic growth and the stable business environment.
“While this year’s Political Risk Map highlights a challenging geopolitical and economic outlook, there are very significant areas of opportunity for organizations that are equipped to navigate the complex and dynamic risk environment,” said Nick Robson, Global Practice Leader, Credit Specialties, Marsh JLT Specialty. “Developing a sophisticated understanding of the political risks facing their business, alongside political risk insurance, can help firms to manage their exposure and fully realize the opportunities for growth global trade and investment brings.”
The Political Risk Map 2020 rates more than 200 countries and territories on the basis of short and long-term political, economic, and operational stability and gives insight into where risks are most likely to emerge. The interactive map can be used to help multinationals make more informed decisions about how to deploy their financial resources and manage the risks associated with their operations, assets, investments, and contracts in the year ahead.
Marsh is the world’s leading insurance broker and risk advisor. With around 40,000 colleagues operating in more than 130 countries, Marsh serves commercial and individual clients with data-driven risk solutions and advisory services. Marsh is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people. With annual revenue over $17 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. Follow Marsh on Twitter @MarshGlobal; LinkedIn; Facebook; and YouTube, or subscribe to BRINK.