30 September 2013News

Social media pushing the frontiers of political risk

The increasing role social media is playing in revolutions and civil unrest globally will force the industry to rethink its assumptions around political risk and apply a more forward-thinking approach to understanding such risks.

That is the view of Marsh’s latest report entitled Social Media Heightens Political Risk in Emerging Markets, which argues that social networks are dramatically changing the face of political risk. The report warned that rather than taking a ‘rear view window’ approach to risk, whereby past experiences are an indicator of future heading, re/insurers will need to take into account the often profound effect social media is having upon the conduct of civil disobedience and war.

Commenting on the implications of social media, Evan Freely, global credit and political risk practice leader for Marsh, said: “social media can exacerbate political risk by accelerating the formation of political protests, and enabling civil unrest to more easily and quickly transition from a single-country phenomenon to a regional event. Conversely, authoritarian governments may use social media to deflect popular discontent away from political leadership and toward foreign entities.”

“This unrest can translate into a variety of political risks for businesses, including expropriatory actions, forced abandonment, forced divestiture, property damage, contract frustration, business interruption, and trade disruption.”

Marsh said that companies would need to take a bespoke, proactive country-by-country approach to their political risk exposure.