Political risk will remain a major concern for multinational businesses in 2018, driven by events including the North Korea missile crisis, ongoing Brexit negotiations, and trade protectionism, according to Marsh’s Political Risk Map 2018.
The political risk landscape will be as turbulent this year as it was last year. A risk which is global and emanates from Asia Pacific is the tension between North Korea, the US, and other countries, which has risen as North Korea continues to conduct missile tests, said the Political Risk Map, based on findings by BMI Research. It predicts the North Korean missile crisis will reach a decisive moment this year.
Other global risks include continued increased global trade protectionism, with the prediction that trade giants – such as the US – will seek further restrictions in 2018, after a brief decline in such measures being implemented in 2017. The Trump administration has asked the US Department of Commerce to conduct studies into “unfair” trade practices, which could be used to justify tariffs. The threat of terrorism remains a concern across many countries, evidenced by attacks in Europe, Africa, Asia, and elsewhere in 2017. Succession risks dominate the political risk landscape in many African countries.
Tensions in Asia Pacific
For Asia Pacific, in addition to the North Korea tensions, there are those in the South China Sea. Tensions between China, South Korea, Japan, and Vietnam over disputed islands remain, but did not develop further in the latter half of 2017. China’s economy has experienced exponential growth over the past few years; however, this slowed in 2017, and it is uncertain whether it will pick up this year.
Multinational organisations face a complex and ever-changing political risk environment, noted the report. Social instability and adverse government actions are among the most common examples of political risks that multinational organisations face when trading or investing in foreign countries. A