According to Stephen Kay, US political risk practice leader at Marsh, US risk managers and CFOs should “sit up and listen” to increasing unrest in emerging economies. Kay noted during Marsh's US Insurance Markets Midyear Update that recent turmoil in formerly stable countries like China and Brazil signals a decisive shift towards high political risk in emerging markets.
Referencing Brazil, which has been rocked by widespread protests in recent weeks, Kay said: “Street protests there have stunned the country’s left wing political establishment and similar troubles exist for many other emerging markets. The difficulties that Brazil and others are experiencing are signs of a key shift towards higher political risk.”
Kay cited stalling economies and the rise of social media as major contributors to unrest, adding that even closed regimes like China and Russia cannot be considered immune to unexpected instability and regime change.
He concluded: “We expect that the political risk:reward ratio for US firms’ direct investments and operations abroad could deteriorate. Most companies don’t manage or measure the effects of political risk on their bottom line; multinationals need to recognise that a new era of volatility in the emerging markets has begun. It is now more important than ever for firms to secure their foreign assets and operations.”
Marsh, emerging markets, BRICs