Funk Political Risk Map
The Funk political risk map provides an overview of your individual political risk. Four weighting factors can be used to determine your own political risk at country level:
- Ownership control risk refers to assets abroad, whereby (production) sites involving significant direct investments are especially important.
- Transfer risk refers to currency restrictions (inconvertibility) and capital controls, which states/ administrations might use, for example, to prevent companies from transferring local profits back to home markets.
- Operational risk refers to politically motivated breaches of contract abroad, among others.
- Corruption risk is an additional indicator of political uncertainty in a country.
How the Funk political risk map works:
1. Define the weighting factors for the analysis. For example, companies with a relatively high number of sites abroad may want to give more weight to ownership control risk. This is done by moving the slider to the right. By contrast, export-oriented companies that do not have their own production sites abroad should give more weight to operational and transfer risks. Companies with high turnover in emerging markets or with primarily foreign government entities as customers may want to give more weight to corruption risk. This is even more the case, if foreign turnover tends to be project-related.
2. The dynamic map then shows the political risk at country level, based on how the weighting factors have been defined. Zoom in on the map to gain a better view of the information. Hover the mouse over the country in question to get information for a specific country.
The weighted risk represents the overall result as a weighted risk score. You can also see a breakdown of the results by risk class, taking the weighting factors into account. The results field also provides an estimated medium-term forecast of how political risk may change in the next five years (↑ = positive trend; → = neutral trend; ↓ = negative trend). The commercial risk refers to the average creditworthiness of customers in the specific country as a three-tiered rating (A/B/C) and is an indicator of the probability of default in the case of privately run foreign companies.
Data basis
The Funk political risk map is based on raw data and data sources from different institutions. The source data is standardised and then aggregated in the described risk classes to be added to the political risk map. The essential data sources are:
- Credit insurers with their country-specific ratings in terms of political risks
- Public institutions such as the World Bank or Euromoney with their offerings like the ‘Political Risk Service (PRS)’ or ‘Worldwide Governance Indicators (WGI)’.
- Non-governmental organisations like Transparency International or the Heritage Group with the ‘Corruption Perception Index’ or the ‘Economic Freedom Index’, which contain overall economic data for specific countries, from which political risks can be derived.
The data sources are generally updated on an annual basis. If significant changes to political risk occur, the data may be adapted sooner. The Funk political risk map immediately reflects any and all changes.