Social Media and Political Risk

Morgan O'Rourke


November 1, 2013


New research from Marsh indicates that social media is increasing political risk, especially in emerging markets. During the recent Arab Spring, social media proved instrumental in allowing protesters to organize and spread awareness of their cause. As social media use grows throughout the Middle East, Africa, Latin America and Asia, this will allow unrest to be spread more easily. “This unrest can translate into a variety of political risks for businesses, including expropriatory actions, forced abandonment, forced divestiture, property damage, contract frustration, business interruption, and trade disruption,” said Evan Freely, Marsh’s global credit and political risk practice leader. According to Marsh, organizations doing business in areas with high levels of political risk will need to reassess the traditional reactive approach to managing political risk. Instead, companies should learn to monitor social media to get information on developing protests before an event threatens their operations and create comprehensive risk management strategies that include purchasing broader, multi-country political risk insurance and reviewing business interruption, supply chain resiliency, crisis communication and credit risk management plans.

Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)