Trump Tariffs and New Trade Relations, Supply Chains: How Does Geopolitical Risk Affect Firms’ Financial Performance?

New trade relationships, patterns, corresponding supply chains. Even the relationship between Canada and the US looks like it will be reimagined and restructured after the April 28th election.

For firms and countries, all of this puts considerable attention on new geographic dispersions of revenue, of which political risk will continue to be a significant, shaping influence.

But which aspects of geopolitical risk are most instructive?

In this excellent piece from the Banca d’Italia’s Working Paper series, the impact of geopolitical risk on firms’ financial performance is assessed.

Using our ICRG risk metrics and a novel measure of corporate exposure to these risks by combining information on the geographic distribution of their revenues with an assessment of the political risks of each country where revenues are earned.

The study found that firms that are more exposed to geopolitically risky markets have a higher probability of default, lower stock prices, and higher financing costs. The magnitude of these effects has been growing since 2017, when tensions between China and the United States started to build up, increasing the risks of geopolitical fragmentation.

Lots here to help with today’s uncertainty. (https://lnkd.in/eMKracxa)

With over 7.5 million back tested risk points, appearing in over 1,000 published works, and independently back tested for accuracy and relevance, PRS’ data series continues to produce meaningful empirical findings, profitable asset allocations, and informed corporate planning and valuation.

No other geopolitical risk firm occupies this position in the industry.

Our clients know it.

Our data drives.

The PRS Group
www.PRSGroup.com
www.christophermckee.net