Syria, Venezuela and Zimbabwe top a list of 40 politically risky territories and destinations for foreign investment, according to data released today by Willis Group.
Syria, which has been in the grip of a bloody civil war since 2011, tops the Index. The Middle East country is ranked in the highest risk band (extreme) for four out of the five perils recorded in the Index, including political violence, terrorism, exchange transfer and sovereign default.
Meanwhile, Zimbabwe and Venezuela are beset by long running economic problems; both are ranked very high or extreme for the risk of expropriation and sovereign default.
The findings appear in the latest edition of the Willis Political Risk Index, which is produced three times each year in partnership with Oxford Analytica.
Political risk is rising in many more countries than where it is falling, as economic stress threatens growth, stability and prosperity, Willis said.
Nineteen countries saw their overall risk score rise; ten countries saw their score fall; while eleven were unchanged.
Slowing Chinese demand, enduringly weak commodity prices, and rising borrowing costs were all cited.
“At this point, most analysts consider a repeat of the emerging markets crises of the late 1990s to be unlikely. Emerging economies maintain far higher foreign exchange reserves now, and exchange rates tend to be more flexible,” said Graham Hutchings, chairman of Oxford Analytica.
“It is also possible that the stresses described above will not emerge at the same time: commodity prices might recover; China’s growth could rebound; or interest rate hikes might be delayed. That said, the next year offers the potential for serious economic stress. And, as has recently been the case in Brazil, economic difficulties can quickly lead to escalating political challenges,” he continued.
“Over recent months we have been monitoring the rising levels of political risks, particularly in emerging market economies,” said Paul Davidson, CEO of Willis’s political and trade credit risk practice.
“We have also launched a new political risk model called VAPOR (Value at Political Risk) which enables companies to obtain a financial evaluation of their own, very unique, political risk exposures. This initiative is something I am confident will become an important tool for many of our clients. It gives them the ability to assess their global portfolio risk and compare the financial impact of political risk exposures, in real dollar-value terms between countries,” added Davidson.