Enterprise Risk Management is meant to consider any and all risks that could affect your organization. One risk that can affect your company that is rarely considered in an Enterprise Risk Management platform is Political Risk. With the recent election and battle over the fiscal cliff, it is apparent that these effects can not only affect the way your company is taxed, but also how the company can meet its strategic goals. The political environment of any given country or state you operate in can impact your company’s Revenue, Property, Reputational or Strategic Risk in a variety of ways. The question becomes: if a major political event were to occur, how would your business survive and how can your company take advantage of the current political environment.
A recent article written by Dan Reynolds and Risk and Insurance Magazine touches on this exact subject. The article shows that Political Risk is not a benign one and that it is multifaceted in that this risk can come from social media, a change in governmental regulation, tort environment, and/or work stoppages. Each one of these immediate risks is caused by actions and events that can not necessarily be insured by your typical insurance policy. Therefore, it is important that a company manage risk in a more three dimensional way; an organization must consider the political environment not solely on how it can negatively impact your organization, but also what aspects of such environment can be used to help increase your profitability.
In order to thoroughly vet this risk for our clients and approach it in a three dimensional way, The ALS Group believes in completing a Country/Project Risk Review to begin to understand various political, tax, supply chain risk, and regulatory environment issues to understand how they can affect your business. This Risk Review allows firm’s management to understand the different political factors and the way they can differ by country, state, or even township. Fully understanding the risks involved will allow firm’s senior leadership to understand the materiality of political risks and their effect on a company’s bottom line.
If you would like to discuss the ERM process, Political Risks, or how to undertake a Country/Project Risk review further; please feel free to contact The ALS Group for more information.
