All five of the emerging-market BRIC countries will face increased political risks this year, according to analysis by Aon Risk Solution.
Its quarterly 2014 Political risk map examined 163 countries and territories, measuring political risks such as violence, government interference and sovereign non-payment. Each country's rating reflects a combination of analysis by Aon, Roubini Global Economics and the opinions of 26 Lloyd's syndicates and corporate insurers actively writing political risk insurance.
Aon's map increased Brazil's political risk score from last year's 'medium-low' to 'medium' because of economic weaknesses, which had increased the role of the government in the economy. This was of particular concern given this year's World Cup and the 2016 Olympics, the firm said.
For Russia, political risk was heightened because recent developments with the Ukraine and the annexation of Crimea, rising from 'medium' last year to 'medium high'. Aon said political strains and focus on geopolitical issues intensified its already weak operating environment for business and currency exchange transfer risks have increased following the risk of new capital flow.
India was moved up the risk scale from 'medium low' to 'medium' with legal and regulatory risks elevated by ongoing corruption and high levels of political interference. Also territorial disputes, terrorism and ethnic conflicts increased the threat of political violence.
China's rating was changed from 'medium' to 'medium high'. This was because of increases in political violence at a time of slowing economic growth, which Aon said suggested that the economic policy deadlock and economic sluggishness were mutually reinforcing.
South Africa is struggling with recurrent strikes, which has changed its rating on the political risk map from 'medium low' to 'medium'. Aon said strikes in the country have become the major means of wage setting, which weakened the outlook.
Matthew Shires, head of political risk at Aon, said: 'The degree of risk and exposures vary considerably in the emerging markets and this highlights the need for institutions to be able to generate their own high level overview of political risk and how it affects them.'
The map shows that there were six countries where political risk has lessened: Ghana, Haiti, Laos, Philippines, and Uganda.
Paul Domjan, managing director at Roubini, added that the quarterly scores would give an updated picture of developing risks, helping investors respond quickly to deteriorating balance sheets and better hedge their exposure.
