Political Risk Brief
Spring 2019

Political Risk Assessment: A Solution for the Era of Volatility

Introduction

America has entered a new and tumultuous political era marked by ideological activism, government intervention, and electoral turbulence.  As a result, business leaders confront proliferating regulatory and legislative vulnerabilities.  During this period of heightened uncertainty, CEOs, boards of directors, and other senior decision makers must anticipate and manage political risk to core business interests.

Developed and proven over more than a decade, Baron’s Political Risk Assessment provides a powerful solution to the most serious threats to the Fortune 500, high-growth middle-market companies, and leading startups.

The Problem

Many companies neglect to assign clear internal responsibility for the tasks of assessing risk and developing solutions, with the portfolio divided among various executives involved in government relations and public policy.  Consequently, organizations often overlook or underestimate mounting dangers.

When confronted with outside criticism – usually generated by an external shock and/or ideologically-driven third parties – companies understandably seek to avoid a crisis.  In such situations, corporate leaders often pursue relief by making substantive concessions and recruiting executives who enjoy credibility with the attackers.

Such efforts commonly fail.  The concessions both undermine the company’s moral confidence and encourage additional demands.  Furthermore, to maintain their ideological credibility, the new hires often lobby internally on behalf of the adversaries.  Natural political allies favorably inclined to embrace pro-business positions resent the extensive efforts to satisfy implacable opponents.

Caught between ideologically-driven internal hires empowered by external pressure groups and the urgent need to rebuild trust with natural allies, the company struggles to find equilibrium.  The resulting deterioration in morale, reputation, and political position leaves the company vulnerable.

The Solution: Political Risk Assessment

Baron illuminates the forces shaping the political landscape.  Cultural, ideological, and demographic trends principally drive ideological activism, regulation, legislation, and electoral change.  Success in the political domain requires understanding these fundamental drivers and, where necessary, actively engaging to shape specific policy outcomes.

The discipline of Net Assessment inspires Baron’s approach.  Developed by the Pentagon to inform strategic planning, Net Assessment produced deep insights into the Soviet Union during the Cold War.  Even as some prominent strategists predicted long-term Soviet advancement, the incorporation of societal, demographic, and technological trends allowed practitioners of Net Assessment to identify critical Soviet vulnerabilities.  Guided in part by this tradition, Baron equips clients with a practical plan of action through mastery of the underappreciated currents driving events.

Baron’s Political Risk Assessment begins with understanding client objectives and conducting a rigorous analysis of the history, culture, institutions, and personalities that define the relevant competing interests.  Baron then holds detailed conversations within a trusted network of decision makers and opinion leaders to obtain high-quality, granular insights.  Baron distills this information into actionable recommendations enriched by a deep understanding of the broader environment.

Baron’s Unique Approach

Baron’s methodology differs markedly from other government relations vendors – including attorneys, lobbyists, public relations firms, and grassroots mobilizers – who operate on a business model that primarily depends on offering specific tactics.  Such vendors have powerful incentives to restrict solutions to narrow categories of professional services.  In contrast, Political Risk Assessment focuses exclusively on the development and management of strategy undistorted by such revenue incentives, as the firm neither offers conventional government relations services nor receives finder’s fees from recommended vendors.

FOR MORE THAN A DECADE, AND ACROSS DIVERSE BUSINESS SECTORS, BARON’S APPROACH HAS GUIDED CLIENTS THROUGH THE MOST CHALLENGING POLITICAL TERRAIN.

This “tactical neutrality” helps align the incentives of the firm with the best interests of clients, preserving the integrity of objective, fact-based strategy development and implementation.  For more than a decade, and across diverse business sectors, this approach has guided clients through the most challenging political terrain.

Case Studies

A company with a market cap in the tens of billions of dollars prepares for a major expansion that carries substantial reputational risk.  Baron conducts a Political Risk Assessment, involving dozens of sensitive meetings with policy experts and political leaders, to develop a strategy that upholds the company’s values and codifies best practices while avoiding a potentially serious political confrontation.  The resulting strategy helps guide the company through a successful announcement.

 

Fortune 50 company seeks to understand the impact of an emerging technology on its business and identify opportunities.  Baron performs an exhaustive review encompassing political and policy dynamics, technology standards, and historical precedents.  The firm’s Political Risk Assessment reveals previously unnoticed considerations and offers novel solutions for the client to resolve outstanding challenges.

 

A corporation in a highly-regulated sector prepares to make an investment that would rank among the largest in the company’s history.  Baron executes a Political Risk Assessment to help protect and enhance the company’s multi-billion-dollar investment.  The project involves consultations with nearly 100 government officials and experts, as well as real-time monitoring and guidance concerning policy, public relations, and political developments.  The analysis reveals unforeseen vulnerabilities and opportunities, equipping the client with critical insights.

 

A company with approximately 5,000 U.S. locations confronts onerous regulations from a federal agency.  Baron conducts a Political Risk Assessment to assess the challenge and develop a comprehensive legislative, communications, and coalition strategy to reverse the agency’s direction.  Baron recruits and manages a coalition of other businesses operating more than 20,000 U.S. stores.  The coalition’s campaign results in the introduction of legislation with more than 100 House and Senate co-sponsors, producing tangible pressure on the regulating agency.  The result: savings of more than $100 million in averted compliance costs.

 

Backed by more than $100 million in venture capital, an innovator seeks to disrupt a heavily regulated market.  Established incumbents and vested political groups respond with state and federal regulations that would prohibit competition and undermine innovation in the industry.  Baron generates a Political Risk Assessment that successfully predicts the next two years of actions by Congress, numerous executive agencies, disparate not-for-profit groups, and private-sector competitors.

 

An investment fund commissions Baron to define the political risk confronting a potential portfolio holding.  Baron conducts a broad-based survey of trends, revealing previously unidentified and underappreciated factors.  Senior leaders incorporate those insights and Baron’s recommendations as a critical dimension of decision making.