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.
Political risks for the global economy until December 31, 2023
The Table above provides a list of thirteen geopolitical events, the estimated probability according to which they will take place by December 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.
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.