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Report: Elections may increase political violence, business risks

Written on Jun 28, 2024

A surge in global elections this year could lead to an increase in political violence and property damage, posing significant risks to businesses, according to a report from insurer Beazley P.L.C. 

The study, “Geopolitical Risk Snapshot 2024,” also highlights the geopolitical risks associated with mining critical minerals for the energy transition and the potential for Africa to become an economic powerhouse despite high political volatility. 

“In a time of heightened global tension and arguably, one of the most volatile political landscapes in decades, the threat of political risk and violence is high on the risk radars of global business leaders,” the report’s authors state. 

The report reveals that 70% of global business leaders are concerned that the outcome of this year’s elections will impact their international operations and ability to trade. Furthermore, 36% of corporate leaders globally believe they operate in a high-risk environment, up from 31% last year. Additionally, 30% stated that political risk is the biggest threat they face this year, up from 27% last year. 

The study also points out that a quarter of global business leaders feel unprepared to deal with political risk, an increase from 23% last year. 

In the United States, 33% of U.S.-based executives believe they currently operate in a high-risk environment, while 32% reported that political risk is the biggest threat to their business this year. 

“History serves as a useful guide and can help our clients to identify whether they may fall victim to political violence this year. Previously we have seen that businesses located close to government assets have been affected by rioting and political violence. While they are not the target of protestors’ anger, they are often dragged in through collateral damage. For these businesses, having the right insurance is crucial to survival in the current geopolitical climate,” Lucy Straker, focus group leader – political violence & deadly weapons protection for Beazley, state in a statement. 

In Canada, 38% of business leaders believe they operate in a high-risk environment, with 25% reporting that war and terrorism risk is their biggest threat. 

The Beazley report warns that fueled by social media and misinformation, political polarization around the world could lead to violence and property damage. It cites recent examples of political violence, such as the storming of the Capitol in the United States in 2021 and violent protests following the 2019 election in Jakarta, Indonesia. 

The study also highlights the risks associated with mining the critical minerals and metals vital for energy transition. Many mining sites are located in politically unstable regions, posing significant risks to international firms seeking to operate or invest in these areas. 

“Businesses need proactive contingency plans for macroeconomic and political risks that they are exposed to. Diversification of supply, understanding local investment risk, and having cover in place before something happens are all vital to building a robust risk mitigation strategy,” stated Matthew Dunne, focus group leader, US political risk & trade credit for Beazley. 

Despite high levels of political volatility, corruption, and civil unrest, the report suggests that Africa has the potential to become an economic powerhouse, driven by renewable energy. However, the continent faces challenges in developing its own energy systems, and sudden political changes, corruption scandals and civil unrest have deterred many investors. 

Recognizing geopolitical risks and implementing early mitigation measures is crucial for businesses seeking to invest in less politically stable areas of the world, according to Beazley. The report also urges insurers to develop risk mitigation solutions to help clients build more resilient businesses and operate successfully in a challenging geopolitical environment. 

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