In the dynamic landscape of global business, it is crucial that organizations stay informed about the geopolitical risks that may impact their operations.
In the second half of 2024, several factors will likely shape the business environment, including disruptive trade policies, the potential for unexpected outbreaks of conflict, and trade uncertainty.
Governments worldwide are increasingly implementing trade policies that can re-order supply chains and raise freight cost especially in the electric vehicles, renewables, and extractive sectors . These policies can lead to sudden changes in trade regulations, tariffs, and customs procedures. Businesses must be prepared to adapt to these shifts and find ways to mitigate the potential impact on their supply chains and bottom lines.
The geopolitical landscape is becoming increasingly volatile, with a shrinking threshold for conflict as evidenced by Marsh’s World Risk Review security scores deteriorating for most regions. This means that even seemingly stable regions can experience sudden outbreaks of conflict, catching businesses off guard. Organizations should closely monitor geopolitical tensions and assess the potential risks to their operations. Having contingency plans in place and maintaining a robust risk management framework can help businesses stay resilient in uncertain times.
Businesses can also benefit from political risk and structured credit insurance. These insurance products provide coverage against potential losses arising from political events, such as expropriation, political violence, and currency inconvertibility.
Demand for political risk insurance and structured credit has continued to grow this year, up 15% compared to 2023, as businesses increasingly leverage these insurance solutions to enhance their risk management strategies and protect their financial interests
In 2024, political risk claims are showing greater geographic variation. However, the overall volume of claims has decreased after two years of highly concentrated Russia-Ukraine-related notifications.
Marsh’s Credit Specialties survey of the PRSC market indicates that insurers continue to take an adaptive approach to underwriting risks. Additionally, while China, Argentina, and a small number of other countries are experiencing capacity constraints, market capacity across PRSC products remains reliable in the large majority of countries.
