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9 political risk challenges arising from COVID-19

Credit, Political Risk and Terrorism
COVID 19 Coronavirus

By Stuart Ashworth | June 25, 2020

In this piece we explore the unexpected yet uncanny parallels between CFOs dealing with emerging markets and “the 12 labours of Hercules”, found in Greek mythology.

Between geopolitical issues, creaking supply chain’s, reducing revenues, and adjustment to the ‘new normal’ of lockdowns, senior managers in companies worldwide are facing a multitude of challenges. Indeed, it has been said that companies face a Herculean task in dealing with the consequences of COVID-19, this is a reference to the seemingly impossible ‘Twelve Labours of Hercules’ in Greek Mythology. The idea was Hercules was set a series of challenges no mere mortal could achieve.

One of Hercules’ challenges was to kill the nine headed hydra, a multi-dimensional challenge which took planning and teamwork.

Whilst most CFO’s are unlikely to need to pull on their sandal’s, string their bow, or sharpen their sword, when dealing with emerging markets there may be some parallels we can draw.

So what are the nine heads of the political risk hydra?

  1. The global financial crisis exposed inequality. Profit was reserved for the few, but the cost of excess was shared amongst the many. A growing fear of foreign competition coupled with a feeling of social injustice drove populism.
  2. In the fast-changing world, there are very few certainties, however it is clear that political risks are ubiquitous and growing (1). These risks are now being accelerated by COVID-19, and each country will suffer from, recover from and will manage this pandemic differently.
  3. The ongoing COVID-19 pandemic is leading to violent social division in some areas. We are already seeing an increase in the instances of political violence, including riots in Europe and civil commotion in Latin America and Africa over access to medical supplies.
  4. A tear in the social fabric of a country may also lead to increased acts of terrorism, as the perpetrators of terrorism may look to exploit the current crisis.
  5. Beyond the physical losses, our clients may need to factor in losses resulting from business interruption.
  6. In this moment of crisis, people are looking to their own governments for strong decisive action. It is widely acknowledged that pandemics lead to xenophobia and this is fertile ground for the seizure of assets (be that repurposing of assets or the full nationalization of assets), or the redistribution of wealth.
  7. A loss of assets, even a temporary loss could lead to loss of earning and a squeeze on cash flow.
  8. We are also standing on the cusp of an emerging market sovereign debt crisis, as emerging markets are economically vulnerable. Even if individual countries are not too badly impacted by COVID-19, tourism revenue will drop, tax revenue will reduce and medical expenditure will need to increase. This will further strain, already stressed economies.
  9. This in turn could lead to a country being engulfed by a currency crisis, which will prevent companies from receiving monies from their foreign enterprises.

The reason Hercules was given 12 tasks was that each required a different set of skills, some took courage, some took cunning and some took teamwork. In the case of the nine headed hydra, Hercules knew he could not tackle 9 problems simultaneously, so he looked for a partner to work with.

In the face of seemingly insurmountable challenges teamwork is key.

Willis Towers Watson have experts across 140 offices who would be delighted to discuss with you how the insurance market can assist your business.




Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage.

The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates.

COVID-19 is a rapidly evolving situation and changes are occurring frequently The information given in this publication is believed to be accurate at the date of publication shown at the top of this document. This information may have subsequently changed or have been superseded, and should not be relied upon to be accurate or suitable after this date.


Head of Credit risks and Political Risks for Corporates, and Head of Sales, Client Management and Innovation, Financial Solutions

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