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The term ‘political risk’ refers to the possibility that investors will
lose money or make less money than expected due to political decisions,
conditions or events occurring in the country or emerging market in which they
have invested. Specific problems include government instability, currency
inconvertibility, nationalization and expropriation. Additionally, political
risk analysis examines social conditions such as crime levels – the number of
recent kidnappings, for example – and land rights issues when evaluating the
level of risk associated with any investment.
Typically, ‘political risk analysts’ gather information on an area or a
country, determine the causes and sources of any related risks and forward their
findings to those making investment decisions. Analysts may also be asked to
prescribe risk management solutions and to offer recommendations to clients
hoping to invest in a specific area of the world. Although political risk
analysis has been developing as a field since the 17th century, it
has seen a dramatic increase in importance only in the past 20 years.
While the political risk divisions of large consulting and insurance
companies have traditionally been most involved with this field, today’s
analysts may find employment with international organizations, smaller financial
companies, rating services, energy firms and online sites specializing in the
sale of political risk information. Those employed in rating agencies, lending
institutions and organizations such as the State Department may be required to
make in-depth economic analysis and would be classified as ‘specialists.’
Analysts with more general knowledge about countries, legal systems and business
practices may find employment with smaller consulting companies that gather and
analyze information and then sell their findings to others.
Career Paths and Entry Salaries
Internships are strongly recommended, especially if they teach accounting
and financial skills or offer some insight into the political process. Prior
experience is becoming increasingly important in finding employment in certain
organizations, such as the World Bank. Requirements appear to be more flexible
for employment with smaller companies, particularly those that are
Internet-based.
Salaries are competitive but vary widely depending on experience and on
the type of organization. The smaller firms and governmental organizations offer
anywhere from $30-$50,000 for an entry position, and larger consulting and
insurance firms pay $60,000 and above.
Qualifications Necessary/Application Procedures to
Enter Field
Political risk analysts typically hold degrees in business, international
relations or related areas but may also have backgrounds in law, intelligence,
journalism, or law enforcement. Representation of investigative journalists and
former intelligence agents is particularly high in online companies specializing
in political risk information. Banking experience is always beneficial and may
be required for those students hoping to work in a financial company.
Excellent research, analysis, and decision making abilities as well as
good communication and writing skills are necessary to succeed in this field.
Companies look for well-informed people who may be described as “intelligent
risk takers.”
Language skills, especially in reading and speaking, may be helpful when
working in a position that is focused on a particular region, but the lack of
such skills will not preclude one from employment in the field in general. In
addition to language skills, some positions may require knowledge of a region
that can only be obtained from having lived or worked there for a longer period
of time.
The ability to decipher a balance sheet, understand a country’s balance
of payments or offer insight into the politics of a particular region will be
very useful. Therefore, it is recommended that students interested in pursuing a
career in political risk analysis take classes in finance, monetary economics,
trade and political science. The latter will be most useful for entry-level
positions, while business-related classes will help those pursuing a more
specialized track. Specific classes that were named include the following:
Accounting, Corporate Finance, Private Sector Project Finance, International
Monetary System and Country Risk Analysis.
Although concentrating in an area study will certainly be useful, many
analyst positions will focus on more than one area of the world. Successful
analysts excel at adapting their knowledge to new and uncertain situations.
Additionally, employers will value the analyst’s ability to write concise and
lucid reports.
Sample Employers
Demand and Future Challenges of Profession
The rapid globalization of business and the
escalating volatility of the financial markets have led to an increasing demand
for professionals who possess the skills to help firms more efficiently manage
their exposure to political and financial risks.
The general outlook for women, minorities and international students
appears comparable to other fields.
International students do have an advantage when searching for employment
with the World Bank, particularly females from underdeveloped countries.
Resources For More Information
Associations/Websites
Howell International,
(www.political-risk.net)
Field Specific Information
Online Information Services and Intelligence
Specialists
Business Monitor International,
www.businessmonitor.com
internet Resources
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PRS Group -
http://www.prsgroup.com/
This page current as of:
April 24, 2008 |
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