Emerging & Geopolitical Risks Flashcards

A company operating in a country with strict capital controls faces difficulty repatriating profits. This is best classified as:

Answer: Transfer and convertibility risk

Transfer and convertibility risk arises when a government restricts or blocks the movement of funds across borders, preventing companies from repatriating earnings or repaying cross-border obligations.

Which of the following geopolitical developments would most directly create commodity price risk for energy-importing nations?

Answer: Military conflict in a major oil-producing region

Military conflict in major oil-producing regions disrupts supply, directly causing oil price spikes that create significant energy cost risk for importing nations.

The concept of 'friend-shoring' in supply chain risk management involves:

Answer: Concentrating supply chains among geopolitically aligned partner nations

Friend-shoring is a strategy of concentrating trade and supply chain relationships among politically allied countries to reduce exposure to adversarial geopolitical relationships.

A Certified Risk Analyst evaluating emerging market debt should consider 'debt distress' indicators, which include all of the following EXCEPT:

Answer: A positive current account surplus with strong reserve coverage

A positive current account surplus and strong reserve coverage are signs of financial resilience, not distress indicators—the other options are classic warning signs of emerging market debt vulnerability.

Which organization publishes the annual Global Risks Report that is widely used as a reference for emerging risk identification?

Answer: World Economic Forum (WEF)

The World Economic Forum publishes the annual Global Risks Report, which surveys global leaders to identify and rank the most critical emerging risks across economic, environmental, geopolitical, societal, and technological categories.

Horizon scanning in the context of geopolitical risk management is best described as:

Answer: Systematically identifying distant or emerging signals that may evolve into future risks

Horizon scanning is a forward-looking process of identifying weak signals, trends, and drivers that could develop into significant risks or opportunities over the medium to long term.

Economic sanctions imposed by a major power can create secondary risk for third-party companies through 'secondary sanctions,' which means:

Answer: Non-sanctioning country firms face penalties for doing business with sanctioned entities

Secondary sanctions target companies from non-sanctioning countries that continue to do business with sanctioned entities, effectively coercing third parties to comply with the sanctioning country's policy.