Emerging & Geopolitical Risks Flashcards

Which framework is most commonly used to assess a country's political risk exposure before entering a new market?

Answer: PESTLE analysis

PESTLE (Political, Economic, Social, Technological, Legal, Environmental) analysis systematically evaluates macro-environmental factors including political risk in new market entry decisions.

A multinational corporation's foreign subsidiary is nationalized by the host government without fair compensation. This is an example of:

Answer: Expropriation risk

Expropriation risk refers to the danger that a host government will seize foreign-owned assets, either with inadequate compensation (expropriation) or none at all (confiscation).

The term 'gray rhino' in geopolitical risk analysis refers to:

Answer: A highly probable but neglected large-scale threat

A 'gray rhino' is a high-probability, high-impact threat that is visible and well-known yet tends to be ignored or underestimated until it charges.

Which of the following best describes 'nearshoring' as a geopolitical risk mitigation strategy?

Answer: Shifting supply chains to geographically closer, lower-risk countries

Nearshoring reduces geopolitical supply chain risk by moving production or sourcing closer to the home market, reducing exposure to distant political instability and long logistics chains.

An analyst notices that a country's government is increasingly controlling media narratives and judiciary appointments. From a risk perspective, this most directly signals:

Answer: Elevated rule-of-law and governance risk

Concentration of media and judicial control by the government signals weakening institutional checks, which elevates rule-of-law risk and makes contractual and legal protections less reliable.

The Overseas Private Investment Corporation (OPIC), now part of the U.S. International Development Finance Corporation (DFC), primarily helps U.S. businesses manage which type of risk?

Answer: Political risk in developing markets

DFC (formerly OPIC) provides political risk insurance and financing to U.S. businesses investing in developing and emerging markets, covering risks like expropriation, currency inconvertibility, and political violence.

When constructing a geopolitical risk heat map, which dimension is plotted on the impact axis?

Answer: Magnitude of potential consequences on business objectives

A risk heat map plots likelihood on one axis and impact (magnitude of consequences) on the other, allowing analysts to prioritize risks by their potential severity on business objectives.