Rethinking Political Risk

Political risk analysis, together with its more recent variant 'geopolitical risk analysis', has grown into a thriving industry, yet its intellectual foundations have not kept pace with its commercial fortunes. What political risk actually is, how it can be measured, and what expert judgment about it is worth remaining open questions.In this fully revised second edition, Cecilia Emma Sottilotta argues that political risk is a relational concept, arising from the interaction between firms and the political environments in which they operate. Any assessment therefore presupposes a decision about what is being measured and from whose standpoint, and that decision is theoretical whether or not the analyst acknowledges it. Drawing on the conceptual tools of the social sciences, the book shows that even the most avowedly pragmatic risk indexes are theory-laden, and traces the consequences for operationalization, measurement and the corporate decisions built upon them.Paying special attention to the cross-cutting role of expert judgment, the volume reviews the techniques most widely used to forecast political events, from statistical extrapolation and game-theoretic modelling to scenario analysis, the Delphi method and prediction markets, weighing what each can and cannot deliver. Case studies of the Arab Spring and of Russia's 2022 invasion of Ukraine test these claims against the record. New material extends the analysis of the digital revolution to artificial intelligence and its effects on the profession itself. The result is a comprehensive overview of a field in transition.