Political and geopolitical risk
How to do a geopolitical risk assessment
A four step approach to geopolitical risk assessment for companies: map exposure, identify drivers, build scenarios with likelihoods, measure impact and set triggers.
Guide
Political and geopolitical riskLast updated
3 minute read
By Zed Three analysts
Short answer
A geopolitical risk assessment identifies how political events abroad, such as wars, sanctions, elections and trade policy, could affect your company's people, assets, suppliers, routes and revenue. Good assessments map exposure first, then judge the likelihood and impact of specific scenarios over a set time frame, and set triggers for action.
Last updated
Step 1: Map your exposure
List the countries where you have staff, sites, suppliers, customers, financing and shipping routes, including the chokepoints your cargo passes through. Most companies underestimate exposure through second tier suppliers and routes.
Step 2: Identify the drivers
For each exposed country, look at conflict, political stability, sanctions and regulation, crime and terrorism, and maritime or chokepoint exposure. Separate what is happening now from what could change.
Step 3: Build scenarios with likelihoods
Write two or three specific, time bound scenarios and give each a likelihood range, for example: we assess it is unlikely (20 to 35%) that a deal reopens Hormuz by Nov 30. Ranges force clear thinking and can be checked later.
Step 4: Measure impact and set triggers
Estimate the effect on revenue, cost, safety and contracts. Agree which signals move you from watching to acting, such as a carrier suspending service or a new sanctions designation, and who decides.
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Frequently asked questions
What is the difference between geopolitical risk and political risk?
Political risk usually means risks from one country's government or politics. Geopolitical risk covers relations between states, such as wars, sanctions, trade blocs and chokepoints.
How often should a geopolitical risk assessment be updated?
At least quarterly for most companies, and weekly for exposed operations during a crisis.
Who should own geopolitical risk in a company?
Usually risk, security or strategy teams, with input from procurement, supply chain, legal and finance.
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