Condoleezza Rice - Political Risk: How Businesses and Organizations Can Anticipate Global Insecurity

Washington Post

Political risk was once just about the actions of governments, such as dictators seizing assets or legislatures regulating industries. Today, governments are still the main arbiters of the business environment, but they are no longer the only important ones. Instead, anyone armed with a cell phone or a Twitter or Facebook account can create political risks, galvanizing action by other citizens, customers, organized groups, and political officials at the local, state, federal, and international levels. Events in far-flung places are affecting societies and businesses around the world at dizzying speeds. Anti-Chinese protests in Vietnam lead to clothing stock-outs in America. Civil war in Syria fuels a refugee crisis and terrorist attacks in Europe, leaving nations reeling and the tourism industry shaken. Video of a United Airlines passenger being forcibly dragged off a plane in Chicago goes viral in China. A North Korean dictator launches a cyber attack on a Hollywood movie studio.

This is not your parents political risk landscape.

Put in the most elemental terms, twenty-first-century political risk is the probability that a political action could affect a company in significant ways.

Twenty-first-century political risk is the probability that a political action could significantly affect a companys business.

This definition is more radical than it sounds. We chose the words political action, not government action, to highlight the growing role of risk generators outside of the usual places like capitals and army barracks and party headquarters. Increasingly, political actions that impact businesses are happening everywhereinside homes, on the streets, and in the cloud; in chat rooms, dorm rooms, and boardrooms; in neighborhood bars and summit sidebars. Companies that want a competitive edge need to manage the risks generated by this widening array of global political actors, from documentary filmmakers to international institutions like the European Union. As we discuss in the next chapter, the Blackfish effect is just one type of political risk. There are many others, from traditional risks like geopolitics to emerging risks that cross borders into boardrooms, like cyber threats and terrorism.