NEW YORK, April 18, 2023 — Nine out of ten companies have suffered a political risk loss in the past year, transforming Political Risk from a low frequency, high severity peril into “everyone’s risk,” according to How are global businesses managing today’s political risks a new report by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.
The 6th annual political risk survey produced by WTW, found that a 92% of all responding companies experienced a political risk loss in 2022, up from 35% in 2020. Other findings include:
The ongoing conflict in Ukraine and resultant humanitarian consequences have had a business impact that one European respondent described as “devastating”. A US technology-company respondent said: “We have decided to end all our operations in Russia and Belarus. We suffered a loss of almost $1 billion.”
| Top Risks 2023 | Number of mentions |
|---|---|
| Ukraine | 13 |
| Decoupling from China | 12 |
| European crisis/European rules | 10 |
| Economic nationalism | 7 |
| Serious ESG | 6 |
| US uncertainty | 6 |
| Rich-world social instability | 5 |
| Contested geopolitical alignments | 4 |
| Taiwan | 4 |
| Bigger government | 4 |
Whatever the financial impact, the shock of war on the European continent had triggered a “paradigm shift,” one respondent said. According to an executive in the automotive sector: “Business and politics have lived in two different realities. The events of the past year have now aligned realities.”
“Panelists were worried about the escalation of the conflict in Ukraine, but more worried about complications like sanctions and inflation.”
Sam Wilkin | Director of Political Risk Analytics at WTW
Looking to the year ahead, Ukraine heads the list of interview panel members’ top risks for 2023, followed closely by decoupling from China and crisis and new regulations in the EU.
“Panelists were worried about the escalation of the conflict in Ukraine, but more worried about complications like sanctions and inflation,” said Sam Wilkin, Director of Political Risk Analytics at WTW. “They’re worried that they could be arrested for facilitating avoidance of sanctions, for example, or that they could be pressured to renegotiate energy contracts next autumn. At the same time, they have more profound concerns about how globalized business models can be made to work in a politically divided world.” For instance, many panelists struggled to imagine how the US-China economic relationship could be unwound without overwhelming damage to the world economy. Many companies are becoming nervous about continuing business there but are unsure about how to disconnect from such a major market. “Every day is China strategy day,” one European automotive sector panelist said.
The survey and interviews, conducted in January and February 2023 by Oxford Analytica, are based on responses received from 50 companies around the world, of which 50% have revenues in excess of $1 billion. The complete report can be downloaded here.
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