Maplecroft Risk Atlas Identifies Risk Hotspots and Investment Opportunities

After a year of heightened global political unrest, Maplecroft’s Political Risk Atlas 2012 has identified some of the most significant political risks and investment picks for business and investors in 2012 and beyond. Key investment risks and opportunities identified include:

  • Continuing instability in Arab Spring countries driven by the same risk factors that sparked political unrest among populations during 2011.
  • Elevated risk of political violence affecting oil and gas companies in the Middle East and north Africa (MENA) region, including heightened terrorist activity and/or sabotage risks, particularly in Algeria, Egypt, Libya and Morocco.
  • Potential risk of forced regime change in Bangladesh, Belarus, Equatorial Guinea, Guinea Bissau, Iran, Madagascar, Turkmenistan and Vietnam deriving from a combination of political, social and economic conditions that reflect those seen in the Arab Spring countries.
  • Reduced long- and short-term risk profiles for Brazil, Russia, India and China (BRIC) and Next 11 (N11) countries, including Indonesia, Mexico and the Philippines, signalling good investment potential.
  • A rising global trend for resource nationalism in hydrocarbon and mineral rich nations including Venezuela, Guinea, DR Congo, Russia, Bolivia and Nigeria.

Continuing Unrest Forecast for Arab Spring Countries

Of the 10 states with the fastest increasing risk trends in Maplecroft’s Dynamic (short-term) Political Risk Index, nine are located in the Arab world, reflecting the political upheaval and unrest taking place in the region. These countries are: Algeria, Bahrain, Egypt, Kuwait, Libya, Morocco, Oman, Syria and Tunisia. The level of unrest and risk of political change may however differ significantly between individual countries.

One of the key findings of the atlas points to a relationship between countries that score poorly for regime stability, corruption and human rights and perform relatively well for digital inclusion, suggesting relative levels of discretionary income, education and increased opportunities for human rights reporting.

For instance, in Bahrain, Egypt, Libya, Syria and Tunisia, social media, such as Facebook and Twitter, have played a significant role during the Arab Spring, which saw different segments of society come together over a lack of political freedoms and social gains, endemic state-level corruption, police brutality and high living costs. Social unrest was also linked to a disenchanted youth frustrated with a lack of opportunity arising from unemployment levels as high as 40%. This combination of factors will continue to drive unrest – of varying intensity – in these countries.

High Security Risks for Oil and Gas Firms in MENA

Maplecroft’s analysis finds that the ongoing instability is also exposing business to heightened security risks, such as physical threats from conflict. These risks were vividly illustrated during the Libyan revolution when operations took place to evacuate oil company staff. The conflict in Syria has led to a loss of revenue for oil companies, while international sanctions have forced investors to withdraw.

“The risk posed to businesses by militants in countries that have been severely affected by the Arab Spring should not be ignored,” said Maplecroft director Anthony Skinner. “There are particular concerns over al-Qaeda in the Islamic Maghreb, which has sought to exploit the turmoil in North Africa, while al-Qaeda in the Arabian Peninsula, has sought to take advantage of extreme instability in Yemen. Staff and assets of energy companies are considered legitimate targets by both groups.”

Decreased Risk in Growth Economies – Offers New Investment Opportunities

The majority of growth economies have witnessed a reduction in political risk across the board, with the BRICs and a number of N11 states – including Indonesia, Mexico and the Philippines – experiencing decreasing risk in both Maplecroft’s dynamic and structural (long-term) risk measures. Counting as one of the key variables, strong growth and investment potential in these countries helps provide the conditions for greater human security and improved living standards and socio-economic development.

However, it is important to recognise that companies still face considerable risks in these growth economies. Several of the N11 states, including Iran and Vietnam, remain in the ‘high’ risk category in both the dynamic and structural risk indices for 2012. Responsible businesses must act to mitigate these risks whilst seizing the opportunities presented by these high-growth countries. How these governments address reform of both labour legislation and domestic spending policy will be important.


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