• Do you have investments/assets in emerging market countries?
• Are you looking for overseas opportunities to increase your returns on investments?
• Is your Equity Investment fully protected?

A dramatic political event in a foreign country may pose little risk to a multinational enterprise, while subtle country policy changes can greatly impact a firm's performance. A student protest may not alter the investment climate at all, but a change in local tax law can very quickly erode a firm's profits. With more firms investing in overseas markets, Equity Risk Partners is pleased to announce that its Political Risk Partners group is here to identify, quantify and mitigate the threat of a government action to your portfolio companies’ financial well-being.

Effective political risk management requires distinguishing developments that pose true risks—a well-defined threat to corporate performance—from political events that are merely dramatic. This is where Political Risk Partners is invaluable.

Firms have little control over the impact of country-level political risks on their operations. The only sure way to avoid country-level political risks is to stop operating in the country in question. But, with increasing returns in emerging market countries, that is not a viable strategy.

The Political Risk Insurance (PRI) market has long played an important role in supporting emerging market investment. Coverage is available for investments and trade-related transactions. Political Risk Insurance provides coverage for investors making direct equity investments, as well as those lending to emerging market borrowers.

PRI can be used as a credit enhancement for securing emerging market debt. The value of Political Risk coverage as a credit enhancement for emerging market bonds and securitizations of these bonds has been supported by the willingness of rating agencies to recognize a Political Risk policy as an effective risk management tool.

The risk mitigation benefits offered by Political Risk Insurance go well beyond financial recompense and indemnification in the event of a loss. PRI Insurers have, at crucial times, significant influence and dialogue with foreign governments and have proved successful in preventing adverse events from occurring and securing preferential treatment for foreign investors in the circumstance where events do occur.
 

What is a political risk?
Political risks arise from the unforeseen actions - or inaction - of a foreign government or government entity, your own government, or a third party country. These risks can frustrate the payment and profitability of all types of contracts and investments. They can also affect the safe repatriation of profits and dividends and the repayment of facilities and loans to financing banks and lenders. These risks include:

• Currency inconvertibility - coverage protects against losses caused by currency transfer restrictions (local currency to hard currency, and transfer of hard currency out of the country). Typically, coverage applies to the interruption of scheduled interest payments or repatriation of capital or dividends due to currency restrictions imposed by the host government.
• Confiscation, Expropriation, and Nationalization - coverage protects against losses caused by various acts of expropriation that would deprive you of your rights of ownership or control of your assets. Coverage also applies to non-transfer of funds following your sale of an asset or disposal of an investment.
• Political Violence - coverage protects against loss of income, loss of equity investments, damage / destruction of physical assets due to Political Violence, war, revolution, civil disturbance, rioting, or terrorism.
• License Cancellation – Investors can insure against cancellation of import / export / concessions licenses, as well as boycotts, sanctions or government decrees.
• Contract Frustration / Repudiation – protects trade transactions against non-payment by foreign Governments or public sector buyers, for goods or services (either before or after shipment). Similarly protects against non-delivery by public sector suppliers of goods bought on cash-in-advance terms by importers. Coverage is also available for non-delivery by a private-sector foreign supplier due to political events or government actions beyond its control.

Risk Management
There are a number of ways to protect your firm against Political Risks. Proper planning and due diligence are most important. Too many businesses begin operations in an unfamiliar country without having taken the time and devoted the resources necessary to ensure a better-than-average chance of success.

Political Risk Partners is alert to what is happening in the emerging markets where our clients have investments and hold assets and is here to ensure that they are properly covered in the event of unforeseen events in that region.

Political Risk Insurance provides real security for investors looking to maximize the potential for higher returns in emerging market countries.

Please contact Chris Hamilton at (415) 874-7104 or email for any further information, questions or comments. We appreciate your continued consideration and support.