Companies have reassessed risk sentiment due to geopolitical events last year into preparedness, according to a new survey released by WTW.
The study produced by WTW titled ‘How are leading companies managing today’s political risks?’ notes that 96 per cent of businesses have invested in new political risk management capabilities this year, including enhancement of corporate processes and creation of cross-functional teams.
After a year in which nearly a fifth of companies had to restate earnings due to geopolitical events, businesses have seen another difficult year in 2024, with 69 percent reporting supply chain disruptions relating to geopolitics.
In particular, 47 per cent of companies have experienced a political risk loss in excess of US$50 million.
The conflict in Ukraine maintains its position as the top risk of the year, with 20 per cent of companies reporting a negative financial impact. Other risks include concerns about elections worldwide, US-China rivalry, uncertain climate policy, mismanaging China risks, and Middle East escalation.
Trends towards geostrategic competition and populism are expected to “strengthen”, according to the study. With the US heading into elections, 64 per cent of the firms expressed concern about political risk in North America.
Sam Wilkin, director of political risk analytics at WTW, says: “After a couple of challenging years, companies seem to have accepted that significant political risk losses are the new normal and are working on building risk management capabilities.”
Wilkin highlights: “Panellists were particularly concerned about infrastructure attacks, like sabotage of pipelines and cables.
“In addition, assets in international waters are being targeted because they can be struck without inviting retaliation."
The survey and interviews, conducted in March and April 2024 by Oxford Analytica, are based on responses received from 50 companies around the world, of which 64 per cent have revenues in excess of US$1 billion.
