L&M PRISK has contributed to a webinar organised by the Schneider Group dealing with challgenges and chances for foreign enterprises in Russia. The recording with lectures by Johannes Leitner and Hannes Meissner (in German) is available via the following link: https://www.youtube.com/watch?v=zHXVWt6NPTo&feature=youtu.be
A recent study among multinational companies in Austria reveals a lack of systematic risk management. As a consequence, corporate leaders tend to neglect their know-how about political frictions in the institutional system and do not consider political risk management strategies in their business planning. This results in missed business opportunities.
https://ccbsr.fh-vie.ac.at/risiken-analysieren-nicht-vermeiden/
In the view of some managers, (semi-)authoritarian rule has advantages for MNEs due to centralised and quick decision-making processes. Taking Hungary under Orbán as example, we show that this is only one side of the coin. On the other side, such systems are characterised by political risks such as quick policy changes, clientelism and favouritism as well as a weak rule of law.
Most post-Soviet leaders are getting old – their average age is 60.5 years. It is no secret, therefore, that they are going to leave office in the not too distant future. Why, however, should the management of a multinational enterprise from the Western hemisphere consider age structure and terms of office in East European and Central Asian countries? The answer is simple: because there is an important political risk factor inherent in the transfer of power.
Such a power transfer might have immediate negative effects, for instance when a non- or poorly orchestrated change leads to chaos. This is not only associated with security risks. Rather, in such an environment, the networks a company has established over years often break away. Informal networks and good relationships are crucial success factors, though, particularly in the post-Soviet region. If they deteriorate, projects with public partners are at risk. In the worst case, the new leaders and their networks might regard MNEs maintaining strong relations to former leaders and their networks as opponents. In such constellations, the new elites will favour companies they themselves have good connections with.
The bad news for MNEs is that they are quite unprotected against such a transfer of power. Companies can insure themselves against certain risks such as expropriation, but there is no insurance covering transfer of power. The good news is that a transfer of power need not take MNEs by surprise. Establishing a broad local network and thorough monitoring provided by in-house or external experts are suitable mitigation strategies.
For more information on this topic, please follow the link to our article published in the journal OstContact (in German): https://owc.de/2019/10/14/machttransfer-im-postsowjetischen-raum-chancen-und-politische-risiken/
Political uncertainty in Russia is on the rise. The Political Uncertainty Index shows levels last seen in the mid-1990s when Russia had to deal with redefining its political role, internally and externally.
Today, Russia certainly has reinvigorated its role as an internationally active power. Nevertheless, the regime faces a number of geopolitical and domestic challenges. Syria, Ukraine, its relation to the EU and the USA, the sluggish economic development, and finally the question of Putin’s power transfer in the not-too-distant future are adding-up. Local firms and MNEs need to operate in an opaque political context.
The Political Uncertainty Index shows a level of uncertainty as high as in the mid-1990ies.
The Chinese Belt and Road Initiative and the associated New Silk Road are enormous investment and infrastructure strategies of historic dimension. Since October 2013, China has invested USD 421 billion into the 75 semi-official Silk Road countries. On one hand, these Chinese investments provide new opportunities for European enterprises, as the respective countries get the basic infrastructure they desperately need. On the other hand, however, the question arises which chances and political risks are associated with China’s New Silk Road in the post-Soviet space. Our newspaper commentary identifies two different trends in this regard. External political risks (at regional level) have recently lost significance: despite China entering Moscow’s Near Abroad (the post-Soviet space), China and Russia have opted to harness synergies. At country level, though, the Silk Road countries are shaped by political risks characteristic of post-Soviet countries, such as legal uncertainty, low guarantee of property rights and clientelism by the ruling elites.
For more information, please follow the link to our newspaper commentary (in German): https://apps.derstandard.at/privacywall/story/2000107131246/wie-bedeutet-chinas-neue-seidenstrasse-fuer-die-unternehmen-europas
Managing environmental risk is now a critical component of doing business in the Pacific Rim, with rising sea levels, global warming and more frequent natural disasters. “We must double down on efforts against climate change as well as develop mitigation and adaptation strategies”, said Chair of the 15thAsia Pacific Business Forum, David Morris, who also warned about the dangers of protectionism.
The Chair of the 15thUN Asia Pacific Business Forum, David Morris, is a political risk consultant and is Senior Expert, Asia Pacific, with L&M Prisk.
“Climate change is for many nations the biggest challenge in the Asia Pacific”, said Mr Morris, a former Trade Commissioner to China representing sixteen small Pacific Island Countries, and former Australian diplomat. “Much of our population lives in coastal cities or islands that will face the early impacts from global warming. We need governments to address climate change but also business needs green finance and innovation to develop industries of the future that will have less environmental impact as old non-renewable business models face redundancy.
“The uncertain definition of ‘sustainability’ means that the market does not yet understand how to price risk. Businesses across all sectors need strategies for climate and disaster resilience. At a time of global disruption and structural change, it is more important than ever to consider grey rhino risks like environmental factors”, Mr Morris said. Grey rhinos are considered to be highly probable and high impact but neglected risks.
The current global retreat from globalisation was another risk for business in the Asia Pacific. “We have many strong development models in our region, demonstrating the benefits of political stability, investing in education and infrastructure and openness to the world for trade and investment. A return to the discredited policies of protectionism and trade wars constitutes another grave risk for businesses benefiting from global supply chains in the Asia Pacific”, he said.
These and other themes were discussed at the 15thUnited Nations (UN) Asia Pacific Business Forum, the annual business forum of the UN Economic and Social Commission for Asia and the Pacific (ESCAP), which was held this year in Port Moresby, capital of Papua New Guinea.
ESCAP estimates the Asia Pacific region, experiencing rapid economic growth, requires an additional $1.5 trillion in investments by governments and business to achieve the UN Sustainable Development Goals by 2030. This is believed to be within the capacity of the region’s public and private sectors, if adequately prioritised. The challenge will be to ensure such investment is sustainable.
Speakers at the Forum addressed the opportunities and risks for small and medium sized businesses entering and surviving in global supply chains. Large regional businesses and organisations presented on the digital economy revolution, the transformation of service industries and infrastructure and connectivity investment and gaps.
The APEC Haus in Port Moresby
The 15th Asia Pacific Business Forum was the first time that this prestigious regional business event has been brought to the Oceania region and its first time to Papua New Guinea, which had hosted the Asia Pacific Economic Cooperation (APEC) Leaders Meeting the year before. The custom-built APEC Haus was the venue for the UN Forum and it was attended by 300 local and international business leaders.
Papua New Guinea is a rapidly developing, resource-rich nation with ambitious plans for new infrastructure and industry development. With a pristine natural environment and rich cultural diversity including 850 languages, it is an investment destination with complex political risks and prospective investors are advised to seek expert advice.
Although Uzbekistan has been carrying out a successful reform process, political risks remain on a high level, in particular in regards to long-term projects with high investments. This is due to the fact that the open door policy under president Mirsijojew has not yet led to sufficient legal and institutional reforms. As a consequence thereof, legal certainty and the guarantee of property rights are still on a low level. However, in regards to short- and mid-term business projects, there is definitely a window of opportunity.
Fore more information, please follow the link to our newspaper contribution, summarising political risks and business opportunities for multionational enterprises in Uzbekistan or contact the team of L&M Political Risk and Strategy Advisory directly.
https://www.derstandard.at/story/2000100746241/usbekistan-zwischen-reformen-und-politischen-risiken
The “Handbook on the Geographics of Corruption” gives a very comprehensive insight into the different manifestations of corruption in different countries. Johannes Leitner and Hannes Meissner shed light on corruption in Ukraine in their contribution.
The book can be purchased directly from the publisher or via Amazon. Here you can take an online look at the book “Handbook on the Geographies of Corruption”!
ABOUT THIS BOOK
In the OECD-area states provide security business to be conducted through a legal-institutional framework where state institutions, working in a legal-rational, predictable and effective manner, are often taken for granted. Worldwide, however the situation is very different. Private actors seize public institutions and processes accumulating ever more power and private wealth by systematically abusing, side-stepping, ignoring and tailoring formal institutions to fit their interests. Such forms of ‘state capture’ are associated with specific political risks international businesses are confronted with when operating in these countries, such as institutional ambiguity, systematic favouritism and systemic corruption.
This edited volume covers state capture, political risks and international business from the perspectives of Political Science and International Business Studies. Uniting theoretical approaches and empirical insights, it examines Azerbaijan, Armenia, Georgia, Ukraine, Moldova, Romania, Bulgaria and Turkey. Each chapter deals with country specific forms of state capture and the associated political risks bridging the gap between political analysis and business related Impacts.
FOR MORE INFORMATION PLEASE FOLLOW THE LINK TO THE WEBSITE OF TAYLOR & FRANCIS: https://www.taylorfrancis.com/books/e/9781315308623