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BUILDING AN INDEX FOR GEOPOLITICAL RISK
Why a geopolitical risk index?
Since the 2009 financial crisis, we’ve witnessed a retreat from the globalization trend that dominated the post-Cold War era. This shift presents clear challenges for global businesses, making it essential for forward-thinking leaders to understand the risks of foreign investments.
The purpose of the index is to offer an effective tool for assessing the geopolitical risks of any country, which is increasingly vital for the strategic decision-making of multinational corporations, particularly in decisions related to production facilities or foreign investments.
To develop this index, we organized participating students into groups. Some of them were focused on different sub-indexes, while managerial groups – data and marketing – took on specific roles. The coordination group was responsible for standardizing data and constructing the final index. The marketing groups developed the website. Our diverse group included students from Political and Social Sciences as well as Finance and Management, requiring us to integrate various skills and adopt a “learning by doing” approach. You can see our latest findings on the Results page.
To answer that question, we kindly asked our Professor Andrea Colli. He is past president of the European Business History Association.
Moreover, as an historian, his research interests range from economic, business and global history subjects, included the history of international relations and geopolitics.
A global overview of the Geopolitical Risk Index for 2022
Geopolitics, the study of how geographical space influences power dynamics, has grown in importance. It now captures the attention of not just scholars but also business leaders, due to the enduring impact of the global financial crisis and the emergence of new regional and global powers. These changes have altered the power balance established post-Cold War and heightened the strategic role of national governments, often viewing corporations as key assets. This environment underscores the need for strategic tools that help business leaders evaluate and manage geopolitical risks.
The tab below shows an overview of our Index. By clicking on each country, it is possible to see the corresponding value of the final index and the relative geopolitical risk compared to the other countries considered. Below the values of the final index, the 6 sub-indices and their value are displayed. It allows the reader to have an idea of how each country performs in a single geopolitical dimension.
The Results section displays the full results. You can learn more about the aggregation strategy and the constructions of the index on the Index page.
To explain why an index like this makes sense today, Professor ANDREA COLLI kindly explained the growing interest in geopolitics.