IMMETHODOLOGY

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Each year, Nova Europa generates an index of the ten most important political risks facing commercial operators and international organisations in Eastern Europe, ordered from 1 (the most serious) to 10. 

 

The aim of the index is to help those with an interest in Central Europe, the Baltic States, the western parts of the Former Soviet Union and the Balkans to understand, in one document, the key threats to their operations in the region over a three-year timeframe. Above all, its focus is on internal stability, economic growth and the viability of the business environment.

 

The index takes a broad view of what constitutes a political risk. At the international level, its definition includes issues such as geopolitical competition and migration. At the national level, it encompasses issues such as ethnic division and government policy. The consistent element is the human factor: the choices which groups and individuals make in the pursuit of security, power, wealth and identity, and how these can affect the interests of foreign actors.

 

The index inevitably exercises subjectivity in the risks it covers because there is no easy way to slice up and package a complex range of interrelated human phenomena into ten discrete risks. The issue of ranking is also a matter of judgment since there is, as yet, no reliable way to quantify political risk. Instead, Nova Europa takes an informed decision based on its understanding of the region and skill in analysis about what constitute the most serious political risks in Eastern Europe at any one time.

 

In doing so, we try to balance international and national factors. As a border region containing small and relatively weak states, the political dynamics in Eastern Europe are invariably affected by the much stronger powers surrounding them. In this respect, international issues, such as strategic competition between Russia and the West, or the crisis in the European Union, usually feature highly in the index. However, these are always weighed against developments at a sub-regional or national level, which can profoundly affect operators in those places. Generally, a threat in a major state such as Poland or Ukraine is of more significance than a threat in one of Eastern Europe’s smaller states – but this is not always the case.

 

The index also tries to balance transitory events, such as a popular coup, with underlying risks, such as ethnic/territorial competition. The first of these can have a dramatic impact for a limited period, featuring high in the index for a few quarters before falling out of it altogether. Slowly evolving issues may remain low down in the index for extended periods without causing serious harm to foreign actors – until the issue explodes. 

 

One final point: the index is relatively indifferent to what risk analysts call ‘opportunities’ - the positive developments such as economic growth, improvements in governance and the adoption of market reforms which improve operating conditions. Partly, this is because an analysis of both risk and opportunity is difficult to capture in the ‘countdown’ format which this index takes. But, partly, it is because the index assumes that readers, like all humans, are more attuned to risk than opportunity. This index aims to satisfy that basic human need.

Nova Europa

Tel: +44 1223 233 919

E-mail: enquiries@novaeuropa.co.uk

© Nova Europa Risk Consulting