Towards a "Global" Political Risk Analysis

The purpose of this paper is to test the relevance of the globalization variable for Political Risk Analysis (PRA). The concept of political risk and the analysis methodology adopted and used in PRA are extremely heterogeneous, varying profoundly case by case. However a common pattern can be identified. In almost every definition or operational concept of political risk, the focus relies almost entirely on the internal dimension. The models developed by both public and private agencies and institutions tend in fact to base their models on variables and indicators internal to the country object of the analysis. In those few cases in which the external variables are taken into consideration, they refer to classical events such as wars. In our opinion this approach is limited because it does not capture the structural processes generated by the global transformations of the last decades. In today’s globalized and ever changing world, we think that in any political risk analysis model it is fundamental to include a transnational perspective. A transnational variable should accordingly be crafted in order to complement the national variable by weighting the effects of the international and global dimension on local and national socio-political events. By testing out hypotheses with reference to two indexes related respectively to stability and governance, we find evidence of a positive relationship between the level of global integration of a country and its degree of stability and even more its level of governance. While these results (to be further tested with more sophisticated statistical tools in the follow up of the research) remain preliminary, they are sufficient to delineate a new understanding of political risk analysis that – by taking into consideration current concepts of political risk and modern theories of globalization – integrates in a comprehensive framework the more traditional variables of political risk with a new transnational variable.