Currently, such a phrase as "political risk" is found in all media, if the publication is devoted to the problems of commercial activity. Now every investor who places capital has experience in the markets, skills in interacting with other companies, and is also familiar with precedents that have happened to other investors. For example, after the well-known trial with the Yukos company, entrepreneurs consider the political risk to have increased repeatedly.
There are not too many studies on this topic, since analysts rarely touch this area. And the lack of information affects, unfortunately, the investment decisions made. Therefore, it is necessary to study the problem of political risk, create assessment and selection methods, develop accounting methods and tools to reduce risks when organizing a commercialactivities.
The concept of interests
The key concept needed to consider the phenomenon of political risk from all sides is the concept of interests. The subject begins to act only after he realizes the existence of certain interests of his own. This process begins after making decisions, which are preceded by an analysis of the situation and the choice of methods of action.
Political and economic risks are calculated just at this stage. What are they? Aiming at the satisfaction of interests, when implementing your own decisions, you may encounter some obstacles that quite often make this implementation impossible, and with the probability of a positive outcome - almost zero. It is in these obstacles that the sources of political and economic risks lie.
Their nature is associated with the promotion of the interests of the entrepreneur, factors that affect the activity as a whole. The political risk factors of the subject are determined by the nature of his interests. That is, if an entrepreneur has political interests, then the risk, respectively, will also be present. The range of interests can be wide or narrow to varying degrees, this does not determine the presence or absence of political risk factors.
The concept of interests is traditionally identified with the political component of investment risks. Any activity of commercial structures can be directly related to the consequences of political risks. Although the operating company is notthe only entity at risk. There are examples where commercial activity leads to the threat of the resignation of entire governments. Political risks include many entities associated with the company - individual politicians, parties, political institutions.
Analysis and forecast
Political risks give the richest examples when the actions of political subjects are considered in the context of predicting the actions of a particular factor, since state-legal factors in their behavior are guided not only by formal tasks, but also by ensuring a political future for their company. And in these cases, there is always a threat to the quality of the political life of a particular subject.
Comprehensive political risk analysis provides the subject with information about yet unknown incentives that may influence decisions. And this analysis is fundamentally different from the analysis of investment risk and its political component. Non-political actors only need a quantitative and qualitative assessment of political risk, that is, an analytical product with a selection of risks, their analysis and recommendations for mitigation. Then investment decisions can already be made.
For commercial structures at present, the concept of political risk is to exclude the possibility of undesirable consequences, that is, damage to participants in the implementation of their own interests. It would seem that non-political actors have nothing to fear. However, political changes are likely toat a level that cannot possibly include political risk management.
Investors should correctly predict the likelihood of any political changes that could negatively affect the entire activity of the company. And this is not the risk itself, this is the source of it. Risk is a situational characteristic of a company's work under conditions of uncertainty.
Non-economic factors
Risks, as already noted, always arise just at the moment when a decision is made. Commercial structures receive them by accepting investment opinions. The main goal of the investor is to make a profit. But here one cannot proceed only from the postulates of economic rationality, although the main task is the optimally efficient solution.
This performance will be influenced by the social and political factors that always fundamentally affect the implementation of an investment project. And therefore it is necessary to take into account factors of a different kind, not related to financial or economic indicators. These are political factors for the most part, as they vary from country to country and region to region, in interaction with different industries and even different investors.
Uncertainty of conditions is practically a threat both for an individual project and for the whole business as a whole. Political risk factors can be at the macro level - for example, war, at the micro level - the usual expropriation. Even at the level of an individual company, an administrative barrier can arise practicallyirresistible, which will make it impossible to obtain the planned results of activities.
That is why nowadays every investor is sure to be interested in politics in order to calculate the risks correctly. Political factors can be divided into profile and background ones. The latter may arise as a consequence of the political process that takes place in a given environment, while the profile ones are in the nature of relations between power and business. Profile factors are the consequences of political decisions.
Other classifications of risk factors
Depending on the interests of the investor, his goals and characteristics of the activity, the significance of certain political risks is determined. Many are only interested in the background factors of country risk or regional risk. This includes banks. The average regional business puts profile indicators higher, because its activity is highly dependent on the regional authorities and their specific decisions. In addition to the division of risk factors into profile and background, there are other classifications.
In the West, political risks are divided into micro and macro risks, extra-legal and legal government. In Russia, to analyze the risks of an investment project, it is better to use the basic classification, which is based on the criteria of the political environment, the object of influence and the origin of the company. The choice of classification, however, most of all depends on the study itself and the tasks set by it.
In Russia, the following classification of investment risks is appliedprojects. According to the object of influence, macro- and sectoral micro-risks, as well as individual ones, are distinguished. By origin - risks for Russian companies and foreign ones. According to the structure of the environment, the risk is regional and federal.
As for the investor - first of all, the political risks of the countries. After all, the risk that any investor is exposed to in the first place also depends on the choice of the state. A characteristic feature of political risk in the Russian Federation is the designation of two levels where it can arise. These are the regional and federal levels. The regions of the country differ greatly in terms of the level of political risks.
In regions
Today, the outdated interpretation of the concept of "region" is no longer used, because it is not only an administrative territorial unit with uniform natural, socio-economic, national and cultural conditions. It is necessary to consider the region as an area for investment activity and an application for capital.
Russian and Western companies are increasingly paying attention to the abundance of new options for expanding production using local resources of a particular region, territory, republic. The consequence of such attention of investors was the formation of a new concept - investment attractiveness. Russia has a very peculiar organization of the political space, where there is no single political, legal and economic field, and the generally accepted rules of the game do not apply.
Even today, the legislative and legal frameworks in the regions differ significantly, and thesethe differences are many and varied. Any territory is a separate social, legal, economic and political environment. That is why each region has its own investment attractiveness, in direct proportion to the investment climate and investment efficiency.
Examples
The regional environment in Russia is characterized by a special social climate prone to sharp fluctuations, as a result of which the probability of force majeure increases, and then the investor's activities are threatened with negative consequences. Here there is the risk of labor conflicts against the backdrop of social tension, and a demographic resource, and a not too high level of market character and openness of political culture, and the mentality itself - all kinds of political risks are present in the regions.
Regions are also distinguished by the fact that local political interests have been perfectly formed in this field, and the struggle will be conducted in absolutely all areas of the economy, since various financial structures are constantly fighting for the possession of resources (administrative ones too) - with varying degrees of conflict.
For example, the Canadian company Kinross Gold failed and curtailed its activities in Magadan and the region, since it lost the auction, and A. Basansky, a local entrepreneur who was supported by local authorities, got the deposit on the Kvartseva hill. Japanese Toyota was also at a crossroads in search of a region to allocate capital: neither the Nizhny Novgorod, nor the Moscow region, nor St. Petersburg could provide a territory free from political risks.
Reputations
Some regions can serve as examples in creating a favorable investment environment, there is a policy of attracting investors. This is primarily the Novgorod region. In the Moscow region, these conditions are also better than even in Moscow, but, nevertheless, not all investors had enough of their volume.
Here are many foreign enterprises only in the food industry. On the territory of the Moscow region there are many hypermarkets of foreign origin, as well as factories Ehrmann, Campina, Danone, Mars. Lipetsk also has a good reputation; it is even considered a model for Russian-Italian investors. St. Petersburg has a favorable geographical factor, the Italian Enel, the Finnish Fortum have entered the fuel market.
The relationship between capital and the political regional environment depends on the potential and the commercial structure itself, its resource base. Particularly large industrialists from abroad very often have the opportunity to lobby their own interests even at the federal level, and not adjusting to the environment, but changing it.
Image of the region
The Koryak Autonomous Okrug has completely and completely succumbed to the activities of the Russian company Renova, since it has the ability to manage its own assets in metallurgy, chemical, mining, construction, energy, transport, telecommunications, housing and communal services and high-tech engineering, medicine and finance not only in the district, but also in Russia and abroad. The company's success inthe region is largely determined by the social situation.
Investment attractiveness increasingly depends on the image that the region has acquired. An image is also a kind of resource, if the image of the region and the company is congruent (their compatibility). If there is high congruence, then social tension is lower, there are fewer labor conflicts. For example, the Knauf company was literally kicked out of the region because the population was outraged by its activities. Even the local Cossacks spoke very loudly. The level of corruption, conflict in the general field of economic interests, and much more has a great influence on the image of the region.
Political risk insurance
In areas of risky investments, where the assessment of economic and political conditions is unfavorable (Russia often also appears in these lists), the applicability of insurance is problematic, since the likelihood of an insured event is high. And that comes with devastating, catastrophic damage.
For example, a change in the political regime, the convertibility of the domestic currency, the conditions for the export of profits are unpredictable risks. Usually these are force majeure events that do not depend on the parties to the transaction. But they are the ones that do the most damage. An ordinary insurance contract designates such a situation as force majeure, stipulating in advance that this list of risks will not entail compensation for the damage caused.
But there is a form of contract concluded on special terms, where insurance also includes cases of non-commercial, that is, political risks. It's socialriots, civil unrest, hostilities, expropriation, nationalization or confiscation of property of an investor from abroad. The property interests of foreign investors are carried out by special state agencies, private companies or international organizations.
Information processing
The following factors should be assessed when analyzing political risks:
1. The nature of the political regime in the region: bureaucratization, the influence of personal factors on administrative decisions, corruption, isolation from society of the authorities in the region, democracy, continuity of power, the relationship of political and economic life, the flexibility of institutions.
2. Political culture: the degree of formation of civil society, involvement in political processes, openness and marketism, religious, ethnolinguistic, class or tribal heterogeneity.
3. Social conditions: degree of social protection, frustration of the population, intensity and vector of social reforms, emigration and immigration.
4. The political and legal environment: the activity of society, the legitimacy of power, the investment legal framework, the level of conflict and political interests, the intensity and nature of administrative reforms, the criminality of the situation, opposition, susceptibility to terrorist actions.
