In recent years, high-tech companies have become increasingly susceptible to the impact of political risk, the consequences of which can be long-term.
Political Risk Assessment and Technology
This process has become particularly apparent during the COVID-19 pandemic, shifts in global supply chains, Russia’s attack on Ukraine, heightened tensions in the Taiwan Strait, and the growing threat of a US- China confrontation. The development of new technologies is determined not exclusively by economic or technical factors bt increasingly by regulations designed to meet foreign and domestic policy needs.
Previously, technological development was significantly ahead of the codification process. Today the situation is changing rapidly, especially in the European Union countries (personal data protection, environmental protection). There is a growing number of areas in which countries, through regulation, can exert pressure on other countries (no longer through the protection of human rights or the sale of licenses for the extraction of raw materials, but, for example, through requirements for localization of digital data, documenting the origin of components and cooperating subcontractors).
Trade restrictions, which emerged during the COVID-19 pandemic, have become a component of trade wars, and high-tech products have become incorporated into strategic sectors such as the energy, food, and pharmaceutical industries. The coming years will show what effect reshoring, a process that involves locating factories within one’s own political, economic, and legal system, will bring. In this way, theoretically, it is possible to secure access to strategic resources locally, becoming independent of foreign supplies. It’s vital because each sector has its specifics related to access to skilled labor, subcontractors, and increasingly sophisticated materials, as well as legal aspects, the policies of individual governments, and the concessions or restrictions they implement.
Over the years, there has been popular opinion that a high level of interdependence, including technological one, is a guarantee of stable economic and political relations. Since crises affect other sectors and regions very quickly, it is in the interest of the most
prominent entities to de-escalate them together. Therefore, there are substantiated concerns that declining levels of interdependence will significantly increase the risk of tensions.
The securitization of various areas of the economy, social phenomena, and political activities, which has been underway for many years, embraces more and more aspects, thus making the international environment more vulnerable to crises. The number of factors affecting the level of political risk is constantly increasing. So there is a growing need to identify them in advance so that, as much as possible, we can prepare for changes.
East Analytics has in-house databases, experienced consultants, and an extensive network of foreign contacts. It enables us to identify political risk factors for companies operating in foreign markets with precarious legal regimes. We continuously monitor legislative, legal, economic, and technological developments.