The Franklin Political Risk and Opportunity Index (FRISKOP) is the first political risk index that combines quantitative measures of the probability of geopolitical events and an assessment of their potential economic impacts. FRISKOP conceptualizes political risk as the combination of the probability of a political event happening during a calendar half-year and its potential impact on the global economy. In contrast to the available risk indices FRISKOP fully quantifies both the likelihood of geopolitical events, its potential economic impact, and its combination. While the potential economic impact is measured once every six months, the probabilities of the events taking place are updated every month.

THE RETURN OF POLITICS | 1 YEAR OF FRISKOP

FRISKOP is a unique tool that merges quantitative measures for predicting geopolitical events and evaluates their potential economic impacts. The celebration will include an afternoon filled with engaging discussions on political risk analysis, featuring interactions among experts, researchers, and practitioners in the field. Highlighting the event will be a special presentation by Dr. Hansjörg Furrer, who is a Senior Risk Manager at NewRe, adding his valuable insights to the dialogue.

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Political risks for the global economy until July 31, 2024

Event
Probability
Impact
Risk
Collapse of Israeli government
Probability: 23%
Impact:
Very Negative
Risk:
High Risk

According to this scenario the Israeli parliament will elect a new prime minister or the parliament will be dissolved and new elections called.

Another absolute majority for the BJP
Probability: 99%
Impact:
Negative
Risk:
High Risk

General elections are to be held in India between April and May 2024. According to this scenario the Bharatiya Janata Party (BJP) will secure another absolute majority in parliament.

Chinese sea blockade
Probability: 18%
Impact:
Very Negative
Risk:
Moderate Risk

China attempts to block Taiwan from accessing the sea or from conducting trade or other activities through the sea by using military or other means involving blockading ports, intercepting and inspecting ships, or using naval or air forces to patrol and enforce the blockade.

Violent riots in major US city
Probability: 14%
Impact:
Very Negative
Risk:
Moderate Risk

According to this scenario at least two incidences of distinct, continuous and violent action directed toward members of a distinct “other” group or government authorities take place. The participants intend to cause physical injury and/or property damage. At least 100 individuals are involved in at least two of the events and at least ten individuals insured.

Terrorist attack in the US
Probability: 7%
Impact:
Very Negative
Risk:
Low Risk

According to this scenario, a terrorist attack takes place on US territory. A terrorist attack is defined as the actual use of illegal force and violence by a non-state actor to attain a political, economic, religious, or social goal through fear, coercion, or intimidation. The incident must be intentional, entail some levele of violence or immediate threat of violence including violence against people, and the perpetrators must be sub-national actors.

Republicans have decisive lead in polls
Probability: 6%
Impact:
Very Negative
Risk:
Low Risk

The Republican presidential candidate leads over the Democratic candidate by at least 5% and so do the Republicans over the Democrats in the generic congressional ballot according to the Fivethirtyeight.com poll average.

China attacks Taiwan
Probability: 5%
Impact:
Very Negative
Risk:
Low Risk

An action by the Chinese military result in the deaths of at least 25 Taiwanese military personnel and/or civilians.

Identity and Democracy 2nd group in EP
Probability: 4%
Impact:
Very Negative
Risk:
Low Risk

The 2024 European Parliament election is scheduled to be held on 6 to 9 June 2024. According to this scenario Identity and Democracy – a right-wing to far-right political group of the European Parliament – becomes the second largest group.

Russia detonates nuclear device
Probability: 3%
Impact:
Very Negative
Risk:
Low Risk

There are concerns that Russia could resort to using nuclear weapons. With "nuclear weapons" we refer to atomic bombs, hydrogen bombs, and other weapons that use fission or fusion reactions to generate an explosion. A radiological device (aka "dirty bomb") is not counted as a nuclear weapon.

Full blockage of Suez Canal
Probability: 2%
Impact:
Very Negative
Risk:
Low Risk

According to this scenario, during at least two weeks less than 10% (around 5) of the container ships pass the Suez Canal on average per day.

Flemish nationalists win 1/3 of all seats
Probability: 17%
Impact:
Negative
Risk:
Low Risk

The Flemish nationalists parties New Flemish Alliance (NV-A) and the Flemish Interest (Vlaams Belang) are leading the polls for the upcoming general elections in Belgium scheduled for 9 June 2024. Currently the two parties hold 42 of the 150 seats in the Chamber of Representatives. According to this scenario, these two parties increase their vote share to 51 or more seats.

Collapse of government in Spain
Probability: 7%
Impact:
Negative
Risk:
Low Risk

The Spanish Prime Minister dissolves parliament and calls a new election.

Argentina to default
Probability: 7%
Impact:
Negative
Risk:
Low Risk

Argentina defaults when it is unable or unwilling to fulfill its financial commitments, notably its debt repayments.

Collapse of German coalition government
Probability: 4%
Impact:
Negative
Risk:
Low Risk

According to this scenario at least one coalition partner leaves the government and the German Federal President calls new elections.

Pakistan to default
Probability: 1%
Impact:
Negative
Risk:
Low Risk

Pakistan defaults when it is unable or unwilling to fulfill its financial commitments, notably its debt repayments.

Big win of Morena in Mexican elections
Probability: 26%
Impact:
Minor
Risk:
Minimal

According to this scenario, the party Morena wins an absolute majority in the Chamber of Deputies and its candidate Claudia Sheinbaum wins the presidential election.

Italian government instability
Probability: 13%
Impact:
Minor
Risk:
Minimal

The Italian government is considered to be in crisis if at least one of the following three events have happened: New elections have been called At least one party of the current coalition has announced to leave the government Giorgia Meloni is no longer prime minister.

Putin replaced by anti-war government
Probability: 1%
Impact:
Positive
Risk:
Minimal

Vladimir Putin replaced by anti-war government Vladimir Putin ceases to be president of Russia and is replaced by another leader or group of leaders that are in favor of halting the war in Ukraine.

Ceasefire between Russia and Ukraine
Probability: 8%
Impact:
Positive
Risk:
Minimal

According to this scenario a ceasefire is announced that is acknowledged by both Russia and Ukraine and includes the whole of Ukraine. "Ukraine" includes the boundaries generally recognized by the international community, including Donbas and Crimea. The Ukrainian government as recognized by the European Union is party to the announced ceasefire.

US-EU agreement on critical materials
Probability: 10%
Impact:
Positive
Risk:
Opportunity

The US and the EU sign an agreement, which enables relevant critical minerals extracted or processed in the EU to count toward Inflation Reduction Act requirements.

Last update: April 20, 2024.

The Table above provides a list of thirteen geopolitical events, the estimated probability according to which they will take place by July 31, their expected impact on the global economy, and our risk rating based on the latter two pieces of information. The Index does not only cover negative risks, but also a few potential events that could have a positive impact on the global economy and consequently represent opportunities.

Methodology

FRISKOP bases its selection of events and the probability attached to it from A Prediction Market with Integrated Algorithms (PREMIA). Prediction markets are virtual stock markets, which use the information contained in market values to make forecasts. The potential effect of the global economy is measured with an original expert survey. Experts engage in rating of paired comparisons of the political events on their impact on the global economy if they happen. The information on the probability of the events and their potential impact are then combined by a formal rule. The methodological report including the list of experts can be found here.

CREDITS

Oliver Strijbis
Affiliated Professor, Political Science

Elisa Volpi
Assistant Professor, Comparative Politics

Bernd Bucher
Associate Professor, Political Science

Contacts

For more information on FRISKOP please contact

Oliver Strijbis
Office: Lowerre Academic Center, Office 5
Phone: +41 91 986 36 38
Email: ostrijbis@fus.edu