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What the Changing Political Climate Means in terms of Business Risks

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What the Changing Political Climate Means in terms of Business Risks

The political landscape across the globe is ever-changing. These changes will undoubtedly impact industries that are dependent on governments for a majority of their profits. It is a fact that politics and politicians play a role in determining the success of a company. For example, pharmaceutical companies need to have their products approved before commercial distribution. Distributors of consumer products and services have to comply with government pricing regulations. The government is also largely responsible for the creation and termination of transport monopolies. In many ways, politics control virtually all aspects of how businesses operate.

With this in mind, the uncertainties and risks brought about by political changes and turmoil have a great impact on companies, especially those that operate on a global scale. When Brexit happened, companies in the UK with trade relations across European Union borders had to make adjustments to their operations. In addition to this, other political changes around the world have trickle-down effects to most organisations in other parts of the globe. There is no point in denying that every business should consider assessing the risks and adopting a management strategy against further political uncertainty and instability.

How to deal with political risk?

The changes in politics cannot be avoided, hence, a business should be able to prepare for the possible negative impact they may bring to the organisation. Consider the following measures for how to prepare a business for grave political scenarios.

  • Consider insurance. Insurance can, up to a certain extent, protect a business from political risk. It has to be considered as a fail-safe method, and best applied together with other risk management strategies.
  • Procedures that control political risk. Many large companies are able to invest in sophisticated risk management strategies. With the help of a firm like Allan and Assoc – consultancy experts are better able to customise methods and procedures to detect and avoid possible situations that may be caused by political risks. Oftentimes, these large companies hire an individual to oversee and manage the company’s exposure to political risks. This is especially crucial when the business operates in highly volatile locations prone to political upheaval.
  • Deal with ongoing political risks. In reality, it is difficult to avoid or detect possible political risks all the time. A business should be ready in case one does occur. There should be strategies and policies in place to ensure an effective exit plan or recovery procedure.
  • Understand the scale of impact when political risks occur. Political risks can impact a business at a smaller scale wherein it is possible to manage the effects within the organisation itself. In cases when a political risk occurs and affects the entire economy, the business should be prepared for the possibility of borders shutting down for business or currencies devalueing. This can leave any organisation with very few options.

In any case, it is quite clear that companies around the world need to be proactive in preparing for, and dealing with, possible grave political scenarios. They should have prepared and implemented risk management procedures and policies to mitigate the negative impact of these scenarios on the overall viability of the business.

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