Political risk arises from the uncertainty created by changing political activity, such as election cycles, change of personnel such as responsible Ministers or narrative around politically sensitive, complex or high profile issues. The pace of political change, different regulatory and political systems across business environments and a lack of control or oversight by organisations makes political risk particularly difficult to measure and forecast but is critical to making informed decisions concerning market access, trade, regulations and expansion.
Risk indicators include:
- Election Cycle
- Government of the Day
- Government Stability
- Machinery of Government Changes
A clear example of political risk is the ongoing election cycle. The heightened pace of government and opposition activity in the lead up to an election and the uncertainty of anticipating the party likely to form government creates real and uncontrollable outcomes. In the 2019 Federal election the difference in the policy of the major parties would have had meant vastly different benefits of property ownership. The uncertainty about which party would form government, and therefore the policy and benefits that would result, resulted in a slowing of the property market.
Organisations that proactively understand how and where their activities overlap with a level of political interest are better positioned to work with government to manage these organisations for mutual benefit and minimal exposure. Those that do not, can walk into a political quagmire resulting in project delays or damaged relationships.
Explore More Risk Categories
Focused matters such as electoral cycles, government stability and other localised political events.
Where a change is policy creates new conditions on operations.
Where government decisions disrupt business inputs required for normal business operations.
Reputational & Conduct Risk
Can erode an organisation's 'licence to operate' and hamper an ability to engage with stakeholders.
Created through failure to address or enforce critical compliance criteria which could trigger an escalated government response.
Manifests when there is limited organisation wide visibility which means the organisation is unable to realise available opportunities.