The world of politics is dynamic and complex, sure. But it is not incomprehensible. << political risk >> can be understood and managed with much more success than most of us think. Wall street hires economists, strategist, and people with business back grounds.
A growing number of physicists, computer scientists, engineers and mathematicians have joined their ranks. This is logical: risk managers like hard data, and they haven’t yet found hard data on political risk. But why did economists missed the 1998 Russian financial meltdown?
They recognized that Russia COULD pay its debts (Russia had seen positive GDP growth, its inflation rate dropped to about 15% (down from 1.500% in 1992), and it enjoyed a positive trade balance, and finally the GKO bonds offered very attractive returns), but they did not address the essential political question: WOULD Russia pay its debts? The ruble devaluation and credit default were, in part, a government response to domestic interest groups.
To do this, we use some smart theories as the “Obsolescing bargaining model (OBM)” of Raymond Vernon and we follow some brilliant techniques as the “Delphi Method”. We make the right assessment of the Political Risk, we manage it – with some action on site – and we provide a political risk management.