Instead of strengthening supranational systems, countries tend to focus on a plethora of interventions and restrictions at the national level, making it harder for businesses to predict the environments they operate in. In which direction will the trade war between the USA and China develop? What about the Iraq sanctions? And what about the harsh punitive tariffs from the USA on European companies in the future? Questions such as this show how massive and fragmented today's political uncertainties are. Internationally active businesses have to again devote more of their attention to national politics and disjointed regulatory requirements.

Managing political risks gives businesses the certainty they need to succeed

Businesses cannot cope with these challenges and avoid negative political influences unless they engage in political management. What does this mean? More than ever before, they are required to keep abreast of politico-economic developments; they have to analyze them and need to anticipate what consequences they may have for them. So political management is about the strategy-driven analysis of existing and potential threats facing businesses in an international context. These threats, which are the result of political and governmental/institutional factors, all have an effect on business success. Not only are compliance standards, but investments and profitability are also threatened by geopolitical risks like war and terrorism.

In addition, these aspects are particularly susceptible to politico-institutional problem factors such as clientelism, corruption, lack of legal certainty, and patriarchal loyalty ties. Hence, businesses need to do both, analyze the global context and keep track of macropolitical and micropolitical risk factors. This allows them to develop political strategies in a targeted manner and decide whether they want to avoid political risks or whether they are willing to accept them and minimize possible consequences.

Managing political risks and interventions includes building relationships with parties involved in shaping the framework for doing business. Although frowned upon by many, lobbying politicians, interest groups or NGOs becomes the order of the day.

Political management makes a vague environment more predictable and gives businesses the certainty they need to succeed, as is illustrated by the experience of companies in politically volatile countries. Yet political strategies are costly. Their effectiveness is hard to anticipate and the benefits they bring remain invisible as long as there is business as usual; and that is the problem: Political management can result in a competitive advantage, but its costs and benefits are hard to forecast. Large businesses are more likely to harness the power of political strategies given their resources and the experience they (possibly) have. SMEs, by contrast, first of all face the challenge of realizing the usefulness and value of political management and then investing in its development, irrespective of the fact that their resources are limited. At any rate, developing expertise in managing political risks and political strategies, or bringing in external know-how, is crucially important. Ignoring the issue is not the way to go, for “It’s the politics, stupid!"