Assessing Political Risk in International Exploration

Political risk assessment for international investments is discussed within a personal essay drawing on thirty-five years of experience in conducting exploration and production ventures. During those years, the author has supervised exploration and production investments of several hundred million dollars per year.

To be truly useful, political risk assessments need to be focused a decade in the future, when successful investments are most at risk. Quantitative predictions of political and economic risk in this distant future are arrant nonsense.

Since most exploration ventures are failures, the primary aim of the investor should be to minimize the costs of failure. Investments should be selected that have the greatest chance of success, and that, if successful, carry exceptional value.

Two additonal screening questions are helpful: Are my people safe? Are we needed, or merely wanted?

Large volumes of additional information on country risk assessment are commonly provided to senior management. Such data have great value in keeping management well informed; they have little value in keeping management dependably advised.