How to Fight - and Win - the Two-Front War Facing the Political Risk Industry

The response to my last article, “Political Risk: An Industry Facing Wars on Two Fronts,” was overwhelming. I heard from long-time veterans of the industry, professionals who left the field out of frustration, young analysts on the front lines, and students worried that they chose a career in a dying field. I think I responded to everyone (if I didn’t, try re-sending) and assured many of you that you shouldn’t lose hope. As promised, after identifying the problems, it’s time for me to offer solutions and reasons to be optimistic.

The Analyst Front

To win the internal war facing the industry, political risk firms need to invest in their analysts. It sounds easy enough, but many firms will make poor investments, like suggesting team building exercises and picnics. These firms will lose the war. Make no mistake about it. This war will have casualties- many bad political risk firms will fall. Consolidation within the industry will be unavoidable. But with the right investments, some companies- willing to confront the industry’s problems- will emerge victorious. There are several things that companies can start to do right now- not in 6 months or a year, after the best analysts have given up and left. Please don’t respond by telling me people are too busy to incorporate these. I know you’re always busy, but let’s be honest- there are down times, and if people just stop procrastinating/leaving work super early/scheduling unnecessary time-wasting meetings, time can be found.

The right investments that political risk firms must make are the following:

1. Create opportunities for analysts to continue learning. This is crucial. Analysts come in with a wide variety of skills. Some took advanced economics classes, and some don’t understand the difference between real and nominal GDP. It’s vital that analysts close any knowledge gaps in their first year on the job, whether via peer-to-peer teaching (teaming new analysts up with advanced analysts so junior analysts can learn from their colleagues) or by taking classes. Many great courses are available online free of charge — check EdX, Coursera, Udacity, etc. — so this does not have to cost the company anything more than a couple hours of the analysts’ time per week, or if done outside of work hours, could count towards progress for promotion. In my opinion, as someone who has taken online classes and done peer-to-peer teaching, the latter is more effective and allows the senior analysts to see the junior analysts’ progress, but if it simply isn’t feasible, courses are better than nothing. The initial focus should be on crucial skills and knowledge such as economics, history, and languages, but analysts should keep learning as they progress, learning as much as they can about infrastructure, new technologies, emerging markets, etc. I would recommend staying away from the numerous “political risk modules” offered by organizations in DC.
2. Use micro-simulations to train analysts. Micro-simulations are short, easy to create/administer exercises designed to train new hires, help analysts practice responding to fast moving breaking developments, prepare to monitor a major international event, incorporate new technologies, or troubleshoot new protocols, to see what is and isn’t working. These interactive experiences are far more effective than hiring someone to come talk at your analysts for 4 hours. They’ll absorb very little. A company can purchase micro-simulations from a simulation designer, for a relatively small fee, or write them internally if someone within the firm has the expertise. It’s possible to administer these micro-simulations during an two-hour period. Sacrifice one boring and unproductive weekly meetings for these experiences once a month and watch the analysts turn into a better functioning team. Don’t wait for things to go wrong during a truly critical moment for clients. This is why first responders simulate responses. Having a list of steps to take in the event of a disaster is great, if you know those are the right steps and will actually deliver the results you need, having seen the steps in action during a simulated crisis situation, and modified them accordingly.
3. Facilitate opportunities for analysts to gain first hand experiences in their region or industry of expertise. Yes, this costs money. And yet, a “mining expert” who has never been to a mining site, but read a few mining websites, should be trusted just as much as a “surgeon” who read a couple of good surgery books but has never performed surgery. It’s simply dishonest. If your company claims to have expertise in a field, but analysts are just Googling, clients will quickly be able to tell. Remember that clients are right there in the mines, or right there in the middle of a city experiencing fast-paced changes, and the two articles an analyst read to produce “analysis” will not have the nuance and details necessary to advise clients how to mitigate specific risks or seize fleeting opportunities. That is, after all, how we got here and why there’s a second front in the war- that of clients pushing back against bad analysis and considering bringing their political risk in-house. Therefore, companies need to look for ways to send their analysts abroad or to industry sites immediately- not next year. Combine such trips with participation in conferences or industry events, where a company can almost immediately recoup some of the cost by engaging in marketing efforts or having analysts drum up new business. Of course, the larger payoff will be in justifiably charging higher fees for better analytical products. A trip to Greece may cost about $5000, but a typical report costs $5000+, and is usually resold multiple times. If your company can’t afford this investment, because you’re paying to much for developers to make a flashy website or tricking out your office, it’s likely that you’re already only one battle from losing the war. Clients who actually need good information, and aren’t just ticking a compliance box, don’t actually care how pretty your office looks. They care whether they’re paying you for good information.

The Client Front

To win the external war- the one waged by clients realizing that they’re paying for sub-par intelligence and analysis, there are also a few immediate steps that firms can take.

1. Bring the sales team and the analyst teams into a room together and acquaint the two teams with each other’s processes. The number one source of problems between clients and analysts is that sales teams, which do most of the business development, do not know or understand the limitations of analyst capabilities- mostly because they’ve never interacted! Sales personnel over-promise, and the analysts are left in a bind where they can only under-deliver, which reflects badly on the sales team if disappointed clients leave, perpetuating a vicious cycle where two critical parts of a company undermine each other. If sales staff know exactly what the analysts can and cannot do, they can craft better pitches and avoid the problem of setting up analysts for failure. If the analysts understand the sales process, they can suggest ways to frame business development proposals in a way that plays to their strengths, while the analysts are busy gaining the knowledge/skills/experience outlined in steps 1–3 above. Then, armed with new capabilities, analysts can help develop new products that the sales team can offer to clients. By being in tighter cohesion with one another, these teams can start working towards attracting interesting work and retaining great clients, instead of working against one another.
2. Have analysts on all calls with clients. Analysts need to hear client requests straight from clients, not have to go digging through email chains to decipher a client’s questions. This carries a high risk of failure, because the analyst may misinterpret the question, waste weeks or months working on the wrong answer, angering the client, wasting resources, etc. Yes, this happens. By having analysts on calls with clients, analysts can ask clients for details immediately, clarify any uncertainties and walk away with a better understanding of the question they’re meant to answer. If a company doesn’t trust analysts to be on calls with clients, that’s a clear warning sign of big internal problems.
3. Find clients whose needs companies are already able to satisfy. Some of you may have read my earlier article, Why Rockstars Need Geopolitical Risk Consultants. Many people replied to say they had never considered that musicians and artists could benefit from political risk insight. There are many similar underserved markets. For example, smaller startups that can’t afford the traditional suite of products offered by political risk firms. However, many of the bigger firms with strong capabilities in limited regions, but not all regions, are better suited towards serving the needs of these startups, which have a presence in just a few countries. While the other analytical teams build up expertise, the stronger analysts can attract and retain such non-traditional clients, who require more limited support. As these smaller clients grow or require more support, the political risk firms’ analysts can meet their increasing needs, and charge commensurately higher fees. Political risk firms ignore smaller or non-traditional clients to their own detriment.

There are additional things firms can do, but many of these cannot be immediately incorporated. They’ll be included in the book that I’m writing on the industry, so keep an eye out for that.

As we see from the news every day, the world is not becoming any simpler to navigate. Clients operating in complex business and security environments will continue to need the right intelligence and analysis to safeguard personnel, property and investments. Political risk as an industry has a role to play in that process, but only if it can demonstrate its usefulness. By following these recommendations, political risk firms can make progress towards that goal, and score victories on both fronts. Yes, all of these recommendations take investment, including time, money and commitment. They require buy-in by analysts, who are much more likely to do better work when they see their superiors investing in analytical capabilities and offering opportunities for advancement. Those who ignore these recommendations may instead consider investing in a white flag.