ASSESSING POLITICAL RISKS

The Matrix of Political Risks

In an increasingly globalising world, the analysis and forecasting of political developments and events in other countries becomes more and more important. The Political Risk Matrix offers an overview of the origins of political risks on the national level, within a social context and in international relations.

For us, the meaning of risk does not merely concern possible disadvantages or threatening losses that may result from political projects and economic enterprises. Possible advantages or benefits have to be considered too. Translating the term of risk into venture represents this understanding. Following the comprehensive assessment of risks, the decision required will rest on the individual risk attitude.

According to the risk matrix, states are particularly risky if they are not ruled democratically or are still on the road to democracy. Conditions and events in these countries often generate considerable political-strategic and legal-material uncertainties. For those planning to get involved in these countries assessing the possible consequences is a farsighted measure. The prospects of success will improve as analysing the risks provides the foundation for taking reasonable precautions.

By the same token, democratic countries differ extensively with regard to political culture, relations between politics and business, and social conditions. The political climate may change severely due to international developments, democratic elections and influences of social movements. New laws and state regulation in every democracy will stem from a specific network of parties, bureaucracies, interest groups, the media and public opinion.