Political risk analysis: an industry fghting wars on two frontsMilena Rodban is an independent geopolitical risk consultant and global fellow at PS21. She tweets at @MilenaRodban and blogs at MilenaRodban.com.Im currently writing a book on the tradecraft of political risk analysis. I use the word tradecraft not because Im suggesting that political risk analysis involves the same type of cloak and dagger tactics of espionage, but becauseI believe the best analysis is done by analysts who complement their research with experience in the feld, talking to locals, surveying environments frst-hand, and constantly accumulating new experiences, not just sitting at a desk. olitical risk analysis is not just summari!ing informationfound on the Internet" it is the result of research, discussions with experts, on the ground experiences and advanced analysis, involving not just raw data, but also a good deal of creativity. #y draft thus far does not paint the political risk industry%by which I mean frms from which other companies purchase political risk analyses%in a &attering light. In fact, the state of the industry appears to be 'uite tenuous, and its no secret. (hen I had the chance to speak brie&y with )assim *aleb at the +letcher ,onference on #anaging olitical -isk at *ufts .niversity in #arch, and told him that Im a geopolitical risk consultant, he gave me the sort of sad smile that I imagine people reserved for proud typewriter repairmen circa /001. 2t best, most people now see political risk frms as glorifed research services with poor track records, and at worst as dens of snake oil salesmen, promising far more than they could ever deliver.It seems everyone whos paying any attention knows that the political risk industry is mired in battles that it is by no means guaranteed to win. *he reality is that thousands of companies are paying massive sums of money to political risk frms that claim such advanced proprietary analytical techni'uesas literature majors sitting at a desk 3oogling all day long. *hats what a business is missing, clearly- a ushkin expert dissecting the details of complex international sanctions related to fnancial transactions. *he bigger problem is, not every 'uestion can be found by 3oogling, but thats all most analysts ever do..ntil recently, the political risk industry was only fghting a war on one front- clients fnally reali!ing that theyre paying for mediocre intelligence. ,lients are increasingly pushing back on the bad products theyre receiving. *hey know the potential that the industry has in helping them navigate complex security and business environments, but these frms are not only falling short of their potential, theyre casting doubt on the industrys value. In addition, with the infusion of in'uisitive millennials into their workforces, all of whom expected to fnd fulflling, intellectually satisfying careers, but are increasinglyending up disappointed, these political risk frms are facing an internal battle.*he political risk industry is now facing a two front war- one from without, waged by dissatisfed clients, and one from within- waged by disappointed analysts.*he political risk industry emerged when businesses seeking to expand abroad reali!ed they were facing a complicated world full of tremendous risksand enormous opportunities. 4ack then, in the /015s, those individuals who spoke languages, travelled widely and accumulated vast professional networks were in demand, for the rich insights they could provide. *hese people had accumulated years of travel experience and sector or political expertise by serving in governments or international organi!ations, as researchers, practitioners or engineers in lucrative industries such as oil and gas, mining, etc. (hen they joined political risk practices, they brought their experience with them, and these frms didnt have to invest very much time or resources in their professional development. ,lients generally got good information, allowing them to sei!e lucrative opportunities, while sidestepping major risks, because the analysts writing their products were experienced, not because they were good at library research.*his was all well and good before the Internet, when speciali!ed information was hard to obtain, and well worth buying from speciali!ed frms. )ow, its harder for political risk frms to pretend that they hold a monopoly on private intelligence. 6o to stay relevant, many lobbied for regulations such as 7duty of care8 and other compliance rules that make it necessary for clients to seekthe services of political risk frms. 4ut if they want to be invaluable, if they want to be indispensable, they have to do a good job. 4ut these frms arent meeting high standards, largely because of the war theyre fghting internally,against cadres of disappointed analysts who reali!e that these frms arent interested in doing a good job- they just want to make a proft by doing the minimum.)owadays, those with signifcant expertise arent staying at political risk frmsany longer than necessary to gain some experience and clout. 9thers, not based in major political risk centers like :.,., );, and ed with recent grads who have little experience, but happen to speak an in-demand language. 2s a colleague recently told me, most of these frms wont even consider someone unless theyre &uent in the right language- even if that candidate has years of real experience in politics or in international organi!ations. 6tunningly, a literature major who speaks &uent +rench is morevaluable than someone who worked to draft legislation at the ?.. @Interestingly, some now charge upwards of .6: A55 per hour for access to grad students doing research on topics of interests to political risk frms clients. *hats one way to fund a dream of being a professional student, I suppose.B 2nd not only do these frms hire mediocre or inexperienced analysts, but they avoid investing much time and resources in developing these analysts skills, short of a few training sessions here and there. 6ome analysts stay because they want to get paid. 4ut the best ones, having reali!ed that there is no clear career progression or future for them, decide tomove on. 2 major frm experienced what one person with knowledge of the situation called 7an exodus,8 having grown tired of the presidents use of analysts as a way to prop up a personal media profle. 6o clients end up with even worse products, because political risk frms are left with weak analysts, some of whom are focused on making sure their boss sounds good on *C, rather than working on the complex 'uestions that businesses need answered.2s a result, some frms have concluded that political risk will never meet its potential. #any, especially smaller frms for whom major retainers are cost prohibitive, are now seeking bargain analysis. If the products are going to be useless, they reason, why pay more than necessary for themD 2s long as theycan tick the boxes on their compliance checklists, even bad analysis- which no one will read anyway- will suEce. +or someone like me, committed to intellectual honesty, thats hard to swallow. *hose who truly need the insightsthat political risk analysis can o>er are looking inward- bringing the capabilityin-house instead of paying for retainers with the bigger political risk frms. 4utmaintaining an in-house function 'uickly becomes expensive.2pparently some people are now reali!ing that the ways things are being done in the political risk industry actually doesnt make much sense. 2nd the evidence is in the numbers. *he balance sheets of some of the big names that come to mind when you think of 7political risk frms8 are barely breaking even, or frmly in the red. 6ome of their fnancial statements are readily available on the Internet. 6o now whatD )ow that the industry is waging a waron two fronts, how does it escape collapseDIve written previously about what we can do to improve the caliber of analysts, but none of the solutions are easy fxes. #illennials are certainly trying to innovate the industry, trying to cut out the bureaucracy and use technology to streamline the process, turning static reports into ever-evolvingwikis, creating dynamic simulations or interactive workshops. 4ut companies launched by millennials are facing the same problem most do when they decide to take matters into their own hands- theyre learning that they cant simply bypass the issues the industry is facing with enthusiasm and a splashywebsite. #any of the problems that the industry is facing outside of the two front war are major obstacles. *hese include lack of awareness of the industryamong the very frms most likely to beneft from it, and the problems of convincing ,-suites to take a gamble on a new provider rather than simply sticking with a long time provider.If it continues to ignore clients complaints and analysts grievances, the industry is doomed to fail, because it will simply become a race to the bottom- which companies can do the bare minimum at the lowest price. If that happens, the political risk industry will truly never meet its potential. Its not like a speciali!ed surgeon whos the only one 'ualifed to do surgery, and therefore cant be cast aside.olitical risk is becoming increasingly accessible to the layman, especially laymen who have experience in industries that are highly exposed to political risk, and who can fgure out what information to look for and how to analy!e it.