The Ascendancy of Political Risk Management and its Implications for Global Security and Business

By Peter Truscott
11 Dec 2006

Business has many models for commercial quantitative risk assessment, including sensitivity analysis and game theory, but it is still vulnerable to the interface between commercial and political risk.

This Whitehall Paper argues that risk management inherently requires a deeper understanding and appreciation of political risk if it is to play an efficient role in assessing and mitigating commercial risk. Political risk has a fundamental role in the generation of commercial risk in the twenty-first century.

This paper examines the defence and energy sectors. It examines a number of quantitative and qualitative risk models utilized by industry and government, and determines whether they are fit for purpose. It identifies best practice in these sectors, and asks what forms of risk management approach and business structures best mitigate political risk.

The Author
Lord (Peter) Truscott of St James’s is a Labour peer and is Parliamentary Under-Secretary of State for Energy at the Department for Trade and Industry. He is a former departmental liaison peer to the Ministry of Defence. In the European Parliament he represented Hertfordshire (1994–99), and was Labour’s Foreign Affairs and Defence spokesperson, a member of the Foreign Affairs Committee and Vice-President of the Security Sub-Committee. He was also a member of the European Parliament’s delegation for relations with the Russian Federation. He has written extensively on foreign and security policy. His major publications include Russia First (1997), European Defence (2000), Kursk (2002), and Putin’s Progress (2004).

Index