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 July 31, 2023

Event
Probability
Impact
Risk
Italian government instability
Probability: 18%
Impact:
Very Negative
Risk:
Moderate Risk

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.

Chinese sea blockade
Probability: 15%
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.

Decoupling of US from Chinese economy
Probability: 15%
Impact:
Very Negative
Risk:
Moderate Risk

The U.S. has decided for semiconductor export restrictions against China and is weighing additional measures for decoupling from China with regards to critical technology. According to this scenario the U.S. government announces export controls similar to the one on semiconductors for other technologies and a new mechanism to review outbound investment flows to China.

China - India conflict
Probability: 11%
Impact:
Very Negative
Risk:
Moderate Risk

China and India have a border dispute in the Himalayas. According to this scenario there is a violent incident between China and India about this border conflict or another issue that result in the deaths of at least 25 military personnel and/or civilians.

Russia detonates nuclear device
Probability: 8%
Impact:
Very Negative
Risk:
Low Risk

Amid successful counterattacks by Ukrainian forces in the east of the country, 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.

Debt ceiling not extended
Probability: 8%
Impact:
Very Negative
Risk:
Low Risk

According to this scenario the US fails to raise its debt ceiling by July 31, 2023. The US debt ceiling is a statutory limit on the total amount of debt that the federal government of the United States is allowed to incur. It is set by Congress and is periodically raised or suspended as needed to allow the government to borrow money to meet its financial obligations.

China attacks Taiwan
Probability: 8%
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.

Political upheaval in Egypt
Probability: 15%
Impact:
Negative
Risk:
Low Risk

Political upheaval in Egypt Violent riots and/or large scale protest in Egypt take place. Violent riots are defined as at least two incidences of distinct, continuous and violent action directed toward members of a distinct “other” group or government authorities. The participants intend to cause physical injury and/or property damage. At least 100 individuals involved in at least two of the events, at least ten individuals insured. Large scale protest are defined as protest with grievances against the authorities of Egypt and at least 1 million participants during one week as estimated by Western media.

Syriza wins elections
Probability: 10%
Impact:
Negative
Risk:
Low Risk

Syriza wins majority of seats Legislative elections are scheduled to be held in Greece by July 2023. In this scenario Syriza (or a political formation of which (former) Syriza is the main organization) wins an absolute majority in the Hellenic parliament.

TikTok ban in the US
Probability: 9%
Impact:
Negative
Risk:
Low Risk

In December 2022, the US Senate introduced a bill that would impose a ban on "all transactions from any social media company in, or under the influence of, China, Russia, and several other foreign countries of concern". A TikTok ban has taken place if the US government has taken action with the effect that a typical American cannot download the TikTok mobile app or use the app if it was previously downloaded.

Terrorist attack in the US
Probability: 8%
Impact:
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.

Large scale protests in China
Probability: 7%
Impact:
Negative
Risk:
Low Risk

Large scale protest is defined as protest with grievances against the authorities of China and at least one million participants during one week as estimated by Western media. This scenario excludes protests in Hongkong.

Erdogan remains president
Probability: 56%
Impact:
Minor
Risk:
Minimal

Recep Tayyip Erdoğan of the AKP has announced that he will run for reelection. Turkey's next presidential election is scheduled for 2023 with the first round of voting to take place on 18 June 2023, and a runoff is scheduled for 2 July 2023 if needed.

Riots in the US
Probability: 28%
Impact:
Minor
Risk:
Minimal

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.

Large scale protest in Hongkong
Probability: 15%
Impact:
Minor
Risk:
Minimal

Large scale protest is defined as protest with grievances against the authorities of China or Hongkong and at least one million participants during one week as estimated by Western media.

Putin no longer president
Probability: 9%
Impact:
Minor
Risk:
Minimal

Vladimir Putin ceases to be president of Russia.

Lukashenko no longer president
Probability: 7%
Impact:
Minor
Risk:
Minimal

Alexander Lukashenko ceases to be president of Belorussia.

Orban no longer president
Probability: 4%
Impact:
Minor
Risk:
Minimal

Viktor Orban is no longer prime minister of Hungary.

Ceasefire between Russia and Ukraine
Probability: 9%
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.

Regime change in Iran
Probability: 17%
Impact:
Positive
Risk:
Opportunity

Where regime change is considered to be present if Ali Khamenei ceases to be "Supreme Leader" of the Islamic Republic of Iran.

Last update: March 21, 2023.

The Table above provides a list of twenty 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 and contacts

FRISKOP is an initiative by Oliver Strijbis, Bernd Bucher, and Juliette Schwak, Professors of Political Science or Political Economy at Franklin University Switzerland (FUS).

For more information on FRISKOP please contact Oliver Strijbis.