Political Risk Management Research Articles

Stability in Sight: Leveraging Machine Learning for Proactive Political Risk Management in the United States of America

This paper explores the application of machine learning (ML) in political risk management, with a specific focus on recent trends in political violence in the United States OF America. The growing intersection of political polarization, disinformation, and societal unrest has created a volatile political climate, as evidenced by events such as the January 6 Capitol insurrection and rising threats to public officials. The paper argues that machine learning could play a critical role in mitigating such risks by analyzing large datasets, including social media interactions, political speeches, and public sentiment, to predict potential flashpoints of violence. Through predictive analytics, sentiment analysis, and anomaly detection, ML can enhance decision-making processes and provide timely interventions to avert violent incidents. Additionally, case studies demonstrate ML’s superiority over traditional methods in risk assessments. Despite the challenges associated with ML, such as data privacy concerns, algorithmic bias, and the complexity of political contexts, this paper argues that machine learning holds immense potential in transforming political risk management. By integrating diverse data sources and refining risk models, ML can significantly improve accuracy and efficiency in predicting and mitigating political risks. The paper concludes with recommendations for further integrating ML tools in political risk strategies to address the increasingly unstable political environment.

A Review on Deep Learning Approaches and Optimization Techniques For Political Security Threat Prediction

In an era of complex geopolitical dynamics and evolving security threats, the accurate prediction and proactive management of political security risks are imperative. This article provides a comprehensive review of the application of deep learning methodologies and optimization techniques to enhance political security threat prediction. Beginning with analyzing the dynamic landscape of political security threats, the paper emphasizes the necessity for adaptive, data-driven predictive tools. It then delves into the fundamentals of deep learning, elucidating core principles, notable architectural frameworks, and their diverse applications across domains. Expanding upon this foundation, the study evaluates the suitability of deep learning models for addressing the multifaceted challenges associated with political security threat prediction. To maximize the utility of these models, the article explores optimization techniques encompassing hyperparameter tuning, transfer learning, and ensemble strategies, assessing their effectiveness in fine-tuning predictions and bolstering the resilience of threat prediction systems. This review involved the utilization of four journal databases: IEEE, Science Direct, Association for Computing Machinery (ACM), and SpringerLink. We analyzed and examined 39 articles, paying close attention to the different patterns and techniques found within the chosen research framework. Through a critical synthesis of existing research, this review offers insights into the strengths, limitations, and future directions of deep learning-based political security threat prediction, contributing to the ongoing discourse on leveraging artificial intelligence for safeguarding global stability and security.

Uses of scientific discourses and markers in shark attack risk management on Reunion Island

The article discusses how the uses of scientific discourses and markers, by activists and policymakers have been perceived by scientific experts and journalists and generated tensions related to science use in managing shark attack risk on Reunion Island. Following a series of shark attacks in 2011, a scientific research program was funded by French authorities to help political decision-making to reduce shark attack risk on the island's west coast, from 2011 to 2015. This program collected a large set of data to understand the ecology of the shark species implied in the attacks. The authorities have also funded a selective fishing program as an operational management device, which opposed activists from sea users' NGOs requiring shark fishing and environmental NGOs requiring sharks' protection. Based on sixteen semi-directional interviews led with local scientific experts, activists, journalists and a mandated fisherman, the study explores how activists and policymakers are perceived as having reappropriated scientific discourses to legitimize their position on shark risk management in Reunion Island. The scientific experts’ perception of activists depends on the epistemology of their discipline and the values they carry about the management of living beings. Otherwise, the political shark risk management strategy on Reunion Island is perceived as preferring to use scientific rationality instead of social claims to justify public policies. These uses of science generated conflicts between scientific experts, policymakers and sea users, and argue for the need of a dialogical process between parties to manage shark attack unpredictable risk, by better considering its social interpretation.

Public Governance in the Context of Global Turbulence: Risk-Reflexive Approach

The article examines methodological trends and combinations in the discourse of political strategic management of dangers and threats under the conditions of the new specific type of risk society formation, which is qualitatively different from the classical version of the ‘risk society’. In this study, using a risk-reflexive approach, authors propose a research route to analyze the transformation of public governance and enlighten the main directions of social behaviour strategies modeling, designing tools for prevention and reducing negative effects of emerging risks. Based on the analysis of the ‘Giddens paradox’ and the concept of ‘organized irresponsibility’ by U.Beck, the problems of the efficiency of public governance institutions in ensuring security and preventing threats are considered. The authors’ attention is focused on analyzing the hierarchy of ways to justify the acceptability of risk and the subjects of risk management. Approaches to the classification of types of power used by subjects of public risk management are investigated. In this regard, the article identifies three mechanisms for the formation of risk-reflexivity (forced, imitative, normative). A theoretical perspective is presented for considering informational, strategic, institutional, motivational and simulation risk reflections in public governance process. Special attention is paid to the main forms of public governance competencies in political risk management, especially in the context of digital transformation, which opens up new opportunities for information impact and cognitive programming of risk perception.

TRANSFORMATION OF POLITICAL AND ADMINISTRATIVE COORDINATION STRATEGIES IN THE STRUCTURE OF PUBLIC RISK MANAGEMENT

The article problematizes a range of issues related to the transformation of coordination relations in the structure of public administration when making decisions under conditions of uncertainty. The main substantive objective of the study is to analyze the conceptual model of strategies and political-administrative coordination mechanisms of interaction in risk situations, the features of management influences that ensure enhanced functionality of prevention and distribution of threats, especially in the context of digitalization. The research methodology is based on classical and modern concepts of public management, risk and its perception, and theories of political coordination of various forms of algorithmic threat management. The article argues that coordination in the structure of public administration is a political form of coordination and correction of political interests, rules of interaction between producers and consumers of risks, their beneficiaries and those most exposed to risks. The article proves that political and administrative coordination in the field of risk management is aimed at minimizing the results of conflicts of interest, deformation of the perception of threats and dangers into riskophobia or riskophilia. The authors argue that government monopolization of the right to information about risks reduces the possibilities for joint coordination and the effectiveness of political strategies to address threats. The analysis made it possible to come to the conclusion that the discoordination of functions, tasks and risk management processes does not allow the preferences and perceptions of risk of social actors to be aggregated into the overall interest of preventing and forecasting threats, and forms points of blockade of the structural-organizational and institutional-regulatory mechanism for controlling hazards in the social system. The study identifies and describes dysfunctions in the field of public administration associated with discoordination of political risk management, highlights institutional, distributional, behavioral and paternalistic management failures in situations of uncertainty, threats and dangers, identifies and describes mechanisms of political-administrative coordination risk management.

Shark attack risk on Reunion Island: Emphasis on local media construction

Since 2011, a series of fatal shark attacks have occurred at Reunion Island, a French overseas territory, and led to an institutional and social crisis related to political risk management. To assist political decision-making, political authorities funded an ecology research program from 2011 to 2015. As shark attacks continued, the program was strongly contested by sea users at risk. The local media coverage of shark risk management strategy in Reunion Island was intense and raised issues related to media representation of stakeholders. The place of scientific experts’ discourses in the media construction of shark risk meaning can be particularly questioned. The current study explores from a sociological and communicational perspective, how the interactions between journalists and stakeholders participate in the media construction of shark attack risk. Semi-directional interviews were conducted with local journalists, scientists, sea users and environmental activists, concerned by the shark risk management. Interviews were led on open-ended thematic questions about their perceptions of journalistic and scientific work, stakeholders’ interests and expectations. The study concludes that to enhance communication and mutual understanding between stakeholders, the objectives and limits of scientific research programs in shark risk management should be discussed by a plurality of stakeholders, including a few local journalists as consultants from media with different editorial lines. In order to include all the parties in shark attack risk management strategy, a democratic debate on the operationalization of the values carried by stakeholders related to the management of living beings should be established by political authorities.

Forecasting stock market volatility with various geopolitical risks categories: New evidence from machine learning models

This paper investigates how geopolitical risks influence the prediction performance on the US stock market volatility with machine learning models. Further, it compares the predictive performance of individual and combination forecast methods. With SHAP algorithm, it could identify which factor has a great impact and fully extract the information of geopolitical risks in predicting. Empirical results show that military build-ups and escalation of war have great importance on predicting realized volatility among various geopolitical risks. The research further emphasizes the superior performance of machine learning and forecast combination methods, especially SVR method and trimmed mean combination. In addition, by allocating portfolio according to the machine learning-based volatility forecasts, particularly elastic net and random forest, a mean-variance investor can achieve sizeable financial benefits. Our paper provides substantial implications for political risk management and volatility forecasting.

Strategies for managing the political risk of investing in infrastructure projects, in developing countries

PurposePolitical risk has been identified as a major impediment to the success of foreign invested projects, in developing countries. Infrastructure projects are especially sensitive to host-country political climates. Governance in emerging economies can be unstable, which adversely impacts infrastructure projects, given their high capital-intensity, long operational periods and high asset specificity. While the detrimental impact of political risk is well documented, the mitigation of such impacts on infrastructure projects remains largely unexamined. This study, therefore, addresses this by exploring the available identified political risk management (PRM) strategies based on resilience theory and evaluating their effectiveness.Design/methodology/approachA mixed-method approach was employed to identify PRM strategies. Firstly, a comprehensive literature review identified 40 potential PRM strategies. However, the applicability of those 40 strategies was uncertain due to the scarcity of PRM studies. Thus, expert interviews, drawing on the insights of Chinese infrastructure industry professionals with experience in FII, were applied to review the identified strategies. This process reduced the pool of applicable strategies to 34. Subsequently, 356 questionnaires were sent out to investors from China, Australia and Singapore, with 218 valid responses returned. Based on the data collected from the surveys, statistical analysis was used to evaluate and classify applicable PRM strategies.FindingsResults reveal the most effective top five strategies for offsetting the detrimental effects of political risk on foreign infrastructure investment to be: (1) selection of suitable markets and projects; (2) maintaining good relationship with government; (3) purchasing political insurance; (4) utilizing capable contractors from both host country and home country; and (5) adopting an appropriate entry mode. The 34 strategies were further consolidated into four meta-strategies through factor analysis, resulting in the formulation of a strategy selection matrix.Originality/valueThe findings of this study offer a rational means by which infrastructure investment practitioners considering projects in developing countries, may arrive at an optimal political risk mitigation strategy. The findings also offer government of host countries directives to improving the political environment in order to attract foreign investment flows into local infrastructure projects.

U.S. Firm-Level Political Risk and Real Earnings Management

U.S. Firm-Level Political Risk and Real Earnings Management

ROLE OF GOVERNMENTAL REGULATORY CONTROLLING PROCEDURES BETWEEN POLITICAL HAZARDS AND RISK MANAGEMENT

Both domestic and international developers are inextricably exposed to political uncertainty and hazards for construction activities on a global scale, either deliberately or inadvertently. Effectively managing political hazards in the developmental sector is essential for project performance, achievement and success. In developmental projects, The Organization Control theory, upon which this research is anchored, applied quantitative methodology with a positivist paradigm using SmartPLS as a statistical tool to take into account the moderating function of governmental regulatory controlling procedures to gauge the effect of political concerns on managing risks in Saudi Arabia's developing sector. Survey questionnaires were sent to the top contractors (those with more than 250 employed workers) with an 81.9% completion rate. The findings indicate that political influences in Saudi Arabia's developing sector have a favorable impact on risk management, which is moderated by governmental regulatory controlling procedures. The connection among political influences and risk management is statistically significant ( = 0.338, M = 0.324, T = 6.185 and p < 0.05), governmental regulatory controlling procedures and risk management is statistically significant ( = 0.438, M = 0.451, T = 8.36 and p < 0.05) and the interaction of governmental regulatory controlling procedures between political factors and risk management is also statistically significant ( = 0.263, M = 0.255, T = 5.339 and p < 0.05). Professionals, specialists and experts can minimize damage resulting from political concerns and conflicts by putting risk management concepts and principles into practice.

Exploring business strategies for assuring compliance to changes in employment laws

Noncompliance with employment and labor laws can result in compensatory and punitive damages, adversely impacting business profitability. Human Resources (HR) personnel who lack strategies to anticipate and react to changes in employment laws risk penalties for noncompliance, resulting in reduced profitability. Grounded in the top-down model of adaptation and political risk management, the purpose of this qualitative multiple case study was to explore strategies some HR personnel use to anticipate and react to changes in employment laws, to avoid compensatory and punitive damages. The participants included nine HR personnel from nine organizations located in the District of Columbia, Maryland, and Virginia tristate area who implemented successful strategies to align with mandated legislation and other existing and new employment laws. Data were collected using semistructured interviews and review of company documents related to applicable labor laws. Thematic analysis was used to analyze the data. Three themes emerged: (a) strategies to anticipate and react to changes in employment laws; (b) strategies to anticipate and react to changes in “ban the box” legislation; and (c) obtaining feedback on reacting to changes in employment laws. Key recommendations include: (a) providing employment law compliance education and training programs for all supervisors and HR staff; (b) changing the company culture and values, beginning with upper management; and (c) collaborating with the legal team to ensure compliance. The implication for positive social change includes increased employment among marginalized members of society, including persons with criminal histories, which may reduce crime rates, recidivism, and reliance on government assistance programs.

Overcoming political risk in developing economies through non-local debt

Infrastructure investments are essential in generating sustainable development but also involve extensive political risk and potentially unreliable local partners. We study how banks financing such investments use syndication with non-local partners to pool economic leverage from trade, investment, and FDI. Using 5928 of the world’s largest infrastructure and energy projects in 160 countries between 2000 and 2013, we show that banks pool economic leverage from banks with dominant economic ties to the host country and from supranational institutions. Our findings contribute three distinct elements to the nonmarket strategy literature. First, they highlight the strategic value of macro-economic dependencies in the management of political risk. Second, our study positions non-local alliances as an alternative to alliance partners in the host-country context. Third, our study is the first in IB to acknowledge the value of debt-side pooling of leverage. From a practical and policy point of view, our findings suggest that practitioners and policymakers should strive to improve the efficiency of debt syndication across borders as a means of mitigating political risk and encouraging infrastructure investment.

Industrial policy reforms for political risk management? Understanding the evolution of automotive industrial policies in Vietnam

ABSTRACT This paper discusses how outward-oriented industry policies are made or changed in Vietnam, an illiberal state facing a rapidly liberalizing global economy, using the case of Vietnam’s automotive sector as a spearhead sector for industrialization. It provides a new perspective by highlighting collective concerns among state elites in Vietnam, a relevant but relatively overlooked factor in understanding key industrial policy reforms in Vietnam. Specifically, this study argues that the positional characters of Vietnam as an illiberal non-major state in the international asymmetrical liberal order help us see when policy reforms, particularly in outward-oriented industries, are likely to be initiated and in what forms or in what directions changes can be made. Drawing on conceptual discussions of conflicting concerns among the illiberal state elites governing developing countries in a liberalizing global economy, this paper discusses how closely major policy reforms in automotive sector are aligned with elites’ interests in reducing these dual concerns in a balanced way.

Risk-reflections design factors: Conflict lines of cleavages

The article examines the problem of risk reflections design based on the interpretation of risks and threats as a way of social order legitimization. Authors analyze the “cleavage” nature (in the terminology of Lipset — Rokkan approach) of the consequences of these designing. Using Paul Slovic “psychometric paradigm”, theory of “sociocultural viability” by Aaron Wildavsky and Karl Dake, Paul Schoemaker expected utility model, prospect theory by Amos Tversky and Daniel Kahneman, Vincent Covello “mental noise” approach and Mary Douglas works on main risk cultural types, the authors suggest that, despite their heuristic capacity all these approaches, modeling of probable risk reflections is impossible without examination of the current political agenda, formal and informal practices of interpreting dangers and threats in public political discourse, as well as political goal-setting and elites intentions. These elements can weaken/strengthen, shift/replace risk reflections, which is critical for identifying key social polarizations (“cleavages”) between “risk beneficiaries” and “risk outsiders”. In this context, the article focuses to “administrative” failures in political risk management, the victim of which is often the whole society, but not just those who were originally nominated as consumers of risk. On the basis of the identified structural, actor-oriented and institutional factors of risk decision-making and the strategies for programming risk reflections by dominant risk producers, the authors conclude that errors in the design of risk reflections generate risk-anomie in the most vulnerable groups of the population.

Operational Risk Management of Political Risk: Evidence from Customer Concentration

Operational Risk Management of Political Risk: Evidence from Customer Concentration

Гібридна війна в Україні як ризикоутворюючий чинник глобалізації

Актуалізовано необхідність наукового осмислення ризикогенного впливу глобалізації у контексті пошуку оптимальних шляхів розбудови ризик-орієнтованого державного управління в Україні. Проаналізовано вплив таких ризикоутворюючих чинників глобалізації для сучасної України, як гібридні війни та гібридні загрози. Доведено, що неефективність і фактична відсутність діяльності з управління політичними та національними ризиками на державному рівні за весь період незалежності України стали одним із основних джерел критичних вразливостей Української держави поряд із спроможністю зовнішнього агресора підсилювати їх дію. Обґрунтування диференціацію політичних ризикогенних чинників, що формували критичні вразливості держави, на такі, що іманентно властиві Україні, і такі, що були навмисно створені Росією.

The Obama administration and civil war in Syria, 2011–2016: US presidential foreign policy making as political risk management

From 2011 to 2016, the Obama administration’s Syria policy appeared to be in constant flux. Prominent accounts portray this as the result of foreign policy making in an arena with no good options, or the use of programs as smokescreens to conceal underlying goals. Both portrayals fit the foreign policy making literature, which views policy as crafted by a president who acts either as guardian of the national interest or as a consummate politician. But the record on Syria does not square with these accounts. The Obama administration neither tried to find solutions to the strategic problems that Syria posed in and of itself, in order to advance the national interest, nor exploited Syria as a political opportunity, to enhance domestic political power. I show, instead, that the trajectory of US Syria policy was consistent with efforts to minimize the risk that the crisis posed to President Obama’s central foreign policy objectives and his domestic political capital and legacy. The Obama administration’s Syria policy resulted from a distinct logic of political risk management.

International projects and political risk management by multinational enterprises: insights from multiple emerging markets

PurposeThis study investigates an under-researched yet fundamental question of how a developed country multinational enterprises (DMNE) perceives and manages political risks when undertaking infrastructure projects in the emerging markets (EMs).Design/methodology/approachThe authors use an abduction-based qualitative research approach to analyze six international project operations of a multinational enterprise originating from Finland in five EMs.FindingsThe findings suggest that the overall nature of political risks in EMs is not the same, except few political risk factors that are visible in most EMs. Consequently, the applied risk management mechanisms vary between EMs, except with few common mechanisms. The authors develop an integrative analytical framework of political risk management based on the findings.Originality/valueThis paper is one of the first studies to identify political risk factors for western MNEs while undertaking international project operations and link them to reduction mechanisms used by them. The authors go beyond the notion of risk being conceptualized at a general level and evaluate 20 specific political risk factors referred to in extant literature. The authors further link these political risk factors with both social exchange and transaction cost theories conceptually as well as empirically. Finally, the authors develop a relatively comprehensive analytical framework of political risk management based on the case projects' findings that combine several strands of literature, including the social exchange theory, transaction cost theory, international market entry, project management and finance literature streams.

Bridging the widening riot and civil disorder protection gap in the global insurance industry

This article explores adjustments to the traditional political risk management practices followed by Multinational Corporations (MNCs) in their international operations to incorporate an increasingly concerning risk arising from the more frequent imposition of economic sanctions on developing countries over the last ten years for political purposes. In order to identify the main determinants of this risk and its consequences, a literature review is conducted, highlighting the models proposed by Tsebelis (1990) and Kakutami (2017) as the main frameworks to understand the dynamics for sanctions impositions, their frequency and the management of this risk by traditional MNCs from developed countries. Kakutami’s model is further enhanced in this article with a game theoretical model to understand the dynamic behavior of MNCs under this context, considering evidences of a growing presence in international markets of MNCs from developing countries, whose motivations for their expansion ar...

Artificial intelligence and the fifth phase of political risk management: An application to regulatory expropriation

AbstractUsing the context of regulatory expropriation, this article extends political risk management theories, forecasting methodologies (employing artificial intelligence, machine learning, and data analytics), and human intelligence evaluation tools useful for multinational enterprise executives in their planning and decision‐making responsibilities. The article identifies three key areas where artificial intelligence will specifically assist managers in analyzing and mitigating risks: (a) earlier identification of risks, (b) precision in risk assessment, and (c) identification of unknown unknown risk correlations. These three categories also represent how artificial intelligence and its application to political risk assessment will evolve in the fifth phase of political risk management, and why it is of particular relevance to risks such as regulatory expropriation. Using the example of an oil exploration joint venture between Russian TNK and BP, and reflecting political and public policy indicators of regulatory expropriation, this political risk management framework and its hypothetical development are illustrated.