Individual protection of political risks

Globalisation offers opportunities but also brings risks. On the one hand, the world’s unrest is continuously spreading: civil war in Syria and Libya, armed conflict in Eastern Europe, Africa, South America and the Middle East, and cross-border terrorist attacks by the Islamic State do not just violate human rights but also pose a danger to existing legal systems. On the other hand, Iran is currently returning to the international stage as an important economic powerhouse. As political developments and their effect on the flow of transactions and the value retention of investments are becoming increasingly difficult to calculate, companies and organisations are seeking more protection against political risks both near and far.

Politics as an uncertain factor

‘Companies should always protect their investments when they involve countries with unstable political conditions,’ advises Andreas Strauss, Deputy Head of Outgoing at Funk Alliance Division. And it should be noted that nations which are considered stable today may become unstable even tomorrow by changed political circumstances.

No one knows, for example, how long German companies may be able to continue to maintain their involvement in Russia and Ukraine. The supposed annexation of the Crimean Peninsula and conflict in Ukraine could cripple bilateral trade further still and significantly influence companies’ business development. It is also really unclear which regions of the world will face social upheaval and state intervention in the foreseeable future, leading to expropriations, nationalisation of production facilities and the inability to convert currencies after interventions in the banking system.

Often in politically unstable countries, those currently in power will suddenly prevent domestic companies from fulfilling their contracts, even though the companies themselves are able and willing to pay as agreed. For example, governments may either pass complete payment bans (moratoria) or at least limit payment transactions significantly. They may arbitrarily ban foreign investors overnight from having immediate access to their property, such as to waterworks, food production facilities and textile factories. And even in politically stable countries, sudden legislative changes may have serious effects on individual industries which were not foreseeable previously.

Risk analysis and individual protection

To make these political risks calculable and therefore protect companies from state intervention and arbitrary acts by those in power, Funk offers tailored risk analyses and comprehensive, individual risk protection. It covers special conditions in contracts and the special risks posed in the target country. This way companies can weigh up the commercial effects of their activities abroad even in extremely uncertain times and protect themselves from the financial consequences of political upheaval, expropriations, civil turmoil, strikes, embargoes, debt cancellation, etc.

Funk offers a holistic approach that combines risk management and insurance solutions: as part of an individual analysis workshop, consultants and the team responsible for the company work together to find out where and how political risks and their effects threaten the business. Building on these results, Funk develops individual cover for contracts, material assets and accounts receivable. At a national level, different products and services that are adapted exactly to the relevant needs are packaged in a tailored credit insurance agreement.

If investments abroad are involved, Funk calls on its international broker network, the Funk Alliance. Using this global network, Funk offers international services at all levels, which are relevant and necessary when it comes to political risks, from the consolidation of international products and ongoing support for the insurance programme to specific assistance in the event of a claim.

10.01.2020