Shepardius

Ever wondered how a global organization decides to insure a massive project in a high-risk country? It's a question of protecting investments against political upheaval—things like a government seizing assets or a war breaking out. The paper, "Linking Political Risk Insurance Pricing and Portfolio Management with Economic Capital Modeling: A Multilateral Perspective?", by Mikael Sundberg, Faisal Quraishi, and Sidhartha Choudhury, gives us a fascinating look behind the curtain at how the Multilateral Investment Guarantee Agency (MIGA) handles this complex challenge. Calculating Risk: The EC model analyzes MIGA's entire portfolio of insurance policies to understand the full range of potential losses. It looks at the probability of a claim and the potential severity of that loss. The Power of Correlation: The model doesn't just look at each project in isolation. It considers correlations. For instance, a new project in a country where MIGA already has a large presenc...

For multinational companies venturing into the global resources sector, navigating political risk is a constant challenge. This ever-changing landscape demands a nuanced understanding of new threats and effective mitigation strategies. Let's explore four key questions: How have political risks evolved in the past five years? While traditional concerns like expropriation, political violence, and currency restrictions remain, newer threats have emerged: Empowered local voices : Local communities, regional governments, and NGOs now wield significant influence, potentially disrupting operations through protests, legal challenges, or social license withdrawal. Transnational crime and corruption : Criminal networks and corrupt officials can manipulate governments and undermine investments. Non-traditional competitors : State-owned companies, sovereign wealth funds, and other players can intensify competition, creating additional risk. How has the global economy impacted political risks? ...

The past decade has witnessed an unprecedented rise in economic powerhouses fueled by resource booms and burgeoning exports. One consequence of this surge is the emergence of a potent financial force: Sovereign Wealth Funds (SWFs). These government-controlled investment giants manage vast reserves, influencing global markets and sparking both intrigue and concern. In the aftermath of the 2008 financial crisis, SWFs' role has intensified. With traditional avenues of return under scrutiny, these funds are strategically navigating a landscape fraught with noncommercial risks: political instability, social unrest, and environmental uncertainties. How can SWFs navigate this perilous terrain and ensure their investments flourish? Transparency: Building Trust in a Murky World Prior to the crisis, SWFs often operated in a shroud of secrecy, fueling anxieties about hidden agendas and opaque motives. This lack of transparency fostered a climate of suspicion, with host countries fearing preda...

Imagine a world where banks operate differently, where interest on loans is forbidden, and where profits are shared instead. That's the world of Islamic finance, a fascinating and rapidly growing field. Built on Values: Islamic finance isn't just about money; it's about following important principles like fairness, sharing, and responsibility. These principles are laid out in the Quran and the teachings of Prophet Muhammad (peace be upon him). They guide everything from how money is earned to how it's spent. Key Principles: No Interest (Riba): This means you can't charge or pay interest on loans. This promotes fairness and prevents people from getting trapped in debt. Profit Sharing: Instead of interest, lenders and borrowers become partners, sharing the profits and losses of a business. This encourages cooperation and risk-taking. Ethical Investments: Islamic finance prohibits investing in things like alcohol, gambling, and weapons. This promotes social responsib...

The global financial crisis of 2008 was the worst economic crisis since the Great Depression of the 1930s. The crisis began in the United States, but it quickly spread to other countries around the world. The crisis was caused by a number of factors, including: Subprime mortgages: Subprime mortgages are mortgages that are made to borrowers with poor credit history. During the housing boom of the early 2000s, lenders made a large number of subprime mortgages to borrowers who were unlikely to be able to repay them. Securitization: Securitization is the process of pooling together a large number of loans and then selling shares in the pool to investors. This process allows lenders to sell off risky loans and to raise more money to make new loans. However, it also made it more difficult for investors to assess the risk of the loans they were buying. Credit default swaps (CDSs): CDSs are insurance contracts that protect investors from losses if a borrower defaults on a loan. CDSs were used...

In the past, disputes between countries and foreign investors were often highly politicized. This meant that the disputes were often resolved through diplomatic channels, rather than through the courts. This could be unfair to both the countries and the investors, as it meant that the outcome of the dispute could be influenced by political factors. In recent years, there has been a growing trend towards depoliticizing investment disputes. This means resolving disputes through the courts, rather than through diplomatic channels. This is fairer to both the countries and the investors, as it ensures that the dispute is resolved based on the law, rather than on political factors. The International Centre for Settlement of Investment Disputes (ICSID) The International Centre for Settlement of Investment Disputes (ICSID) is an organization that helps to resolve investment disputes. It was created in 1965 by the World Bank. ICSID provides a neutral forum for countries and investors to resolve...