Marvin Zonis & Associates Inc., political risk consultants based in Chicago, lists China, Russia and Nigeria at a high risk of political crises. The firm recently introduced a new political-risk rating system that is intended to help international investors anticipate economic crises that might be triggered by political instability and poor economic policy, such as that experienced by Indonesia in 1997. The new system, which is updated on a monthly basis, rates Russia and China at high risk in the long term and Nigeria at high risk in the short term. "The challenges of quantifying political risk are substantial," says Samuel Wilkin, director of country analysis for Marvin Zonis & Associates. "Investors need tools to measure how political events might threaten their anticipated returns." Businesses seeking to take advantage of profitable international opportunities must recognize that some countries that appear to be stable and growth-oriented actually are quite vulnerable to catastrophe, he says. "Conversely, countries that have unstable politics may be shunned by investors even though their fundamentals would suggest dramatically diminished political risks." The ratings are based on fundamental risk drivers identified by the research of Marvin Zonis, who teaches international political economy at the Graduate School of Business at the University of Chicago. Wilkin says Nigeria is rated at high risk of a political crisis because of its potential for social upheaval. "Russia's very negative ratings are based primarily on critical drivers of political instability, notably the devastation inflicted on Russian society by its economic collapse." China is listed at risk of serious political upheaval or economic policy crisis. "China's fundamentals are not as alarming as Indonesia's fundamentals were five years ago, but they are problematic enough that for the long term, we rate China at 'high risk.'" -Paula Dittrick
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