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What Is Political Risk & How Can It Impact Your Global IT Deployment?

What Is Political Risk & How Can It Impact Your Global IT Deployment?

No matter who you’re working with, when you’re doing any kind of international business, your company is bound to encounter some form of political risk that could impact your project. For example, diplomatic tensions or pandemic-related travel restrictions can directly impede global IT deployments. These factors can also indirectly affect the project by way of relationships with vendors, local technicians, and other external sources. 

Global IT deployments require a significant amount of time and effort — make sure that energy is well-protected. Find the support you need to help you navigate potential political risk situations.

What Is Political Risk?

There are always risks in business. However, when you’re working on a project overseas, you must also consider the other country’s laws, regulations, and political climate — as well as your home country’s. Hence, political risk refers to political decisions, events, and conditions that could cause instability and may negatively impact investment returns. 

Politics in general are always risky, and businesses can easily be impacted by any political decisions that go the “wrong” way. Sure, there can always be debates about which is right and which is wrong, but political risk captures the idea that there’s a chance political events will turn into losses for your project or business as a whole.

There are a few different types of political risk that you should be aware of so you can be prepared in case you encounter them. First of all, taxes are worth watching. Tax rules and rates can change — and when they do, so will profitability. Have someone on the project who can understand complicated tax laws.

You’ll also want to watch for political instability. While this type of risk is often difficult to predict, keep your finger on the pulse of the country you’ll be working in so you can see it coming as soon as possible. This can easily disrupt “business as usual.” Sometimes political instability can be overcome quickly, but oftentimes it takes time for the market, economy, and businesses to recover and return to normal.

If you rely on a global contingent workforce, complying with international labor laws is especially important. You’ll want to learn how the target market classifies contractors compared to full-time employees and what the minimum wage is. You’ll also want to monitor the economy, as politics can often influence economic decisions.

Be aware that administrative delays could come as a result of political turmoil. Depending on the state of the government, documents and other official approvals may be delayed. Finally, look for trade barriers the country you’re working with has in place. These can impact tariffs and sometimes cause a negative impact on business.

How to Mitigate Political Risk

It’s impossible to completely erase political risk. After all, business itself is full of risks. However, by working with a partner who is well-versed in these events, you can rest assured they’ll do everything to not only protect your investment but also communicate any issues as they arise. 

At Kinettix, we have teams and technicians in over 90 countries worldwide. We provide a reliable contingent workforce along with years of experience helping companies navigate the political risk of international business as they’re working toward their global IT deployment.

By partnering with us, you can leverage our global expertise in times of uncertainty to keep business moving while still respecting the current political climate in the other country — or your home country for that matter. If you’re ready to get started, so are we. Let’s discuss how Kinettix can help you.

ULTIMATE-GUIDE-TO-DOING-BUSINESS-IN-RUSSIA

Chad Mattix

Written by: Chad Mattix

A global IT executive experienced in establishing strategic partnerships for large U.S.-based organizations, Chad Mattix specializes in managed services, contract pricing and negotiation, and the startup and growth of technology services companies. Chad has spent the last 15 years helping large U.S. retailers and U.S.-based IT service providers expand their capabilities across the globe to follow their clients’ expansions. He has developed and completed full entity formations in Brazil and China and has worked with sales pursuit teams in messaging and client-facing presentations. He has also established global alliance and partnership models for multiple global IT organizations. Chad travels around the world to develop and maintain long-term relationships with employees, clients, vendors and partners, which are critical for success.

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