Political risk becomes 'everyone's risk': WTW

Political risk becomes ‘everyone’s risk’: WTW

24 April 2023

A new report from WTW reveals nine in 10 companies have suffered a political risk loss, as it warns of a shift towards “high severity” events and financial consequences due to global threats.

The broker’s annual political risk survey found that 92% of responding companies experienced a political loss, up from 35% in 2020.

The conflict in Ukraine was among the dominant threats, with 86% of respondents from Western Europe reporting a net negative financial impact due to the war, compared to 33% of North American respondents.

WTW also notes responses that warned against decoupling from China, Europe’s ongoing energy crisis, and economic nationalism as top political risks, with 100% of respondents saying that they have enhanced their risk management capabilities since February last year.

It says the results will require the industry to reassess political risks given the increased severity and frequency of events, with one unnamed respondent remarking on a “paradigm shift” due to the Ukranian conflict.

“Panelists were worried about the escalation of the conflict in Ukraine, but more worried about complications like sanctions and inflation,” WTW Director of Political Risk Analytics Sam Wilkin said.

“They’re worried that they could be arrested for facilitating avoidance of sanctions, for example, or that they could be pressured to renegotiate energy contracts next autumn.”

“At the same time, they have more profound concerns about how globalised business models can be made to work in a politically divided world.”