Political risks rarely have isolated effects – they ripple across an entire company, aggravating other types of risk all the way back to Canada.

Consider the fictional ABC Corporation, which has profitable operations in a Sub-Saharan African country.

• ABC cannot repay an outstanding amount on its bank line of credit in Canada.
• Given that its line of credit is almost fully utilized, ABC needs to take aggressive steps to preserve cash. Consequently, it turns down orders from several new customers.
• This tarnishes the company’s reputation with potential customers. Its credit rating drops with suppliers and banks.
• ABC has to delay payment to key suppliers and holds out on bidding on new opportunities that will inevitably be won by its competitors.
• Future sales growth is compromised and cash flow becomes further strapped as suppliers respond by providing less favourable payment terms to ABC.

• ABC can pivot and continue to thrive, knowing it has protected its profits, future growth and investors with proper safeguards.
• ABC’s insurance policy covers up to 90% of its losses due to this uncontrollable event.

As you can see, it only takes one bad experience to make a company believe in managing and mitigating political risk. Having a solid political risk management plan bolstered by appropriate insurance coverage can protect your company from any unnecessary losses that are beyond your control.