Companies worldwide are becoming increasingly concerned about political risk as international conflict and deglobalisation have a growing influence on business, a report published by WTW and Oxford Analytica has found.

More than 90% of the 50 businesses surveyed for the report posted a political risk loss in the past year, up from 35% in 2020.

Russia’s war with Ukraine has caused significant turmoil for businesses, particularly those in Europe. Fully 86% of companies based in Western Europe reported a net negative financial impact of the conflict, compared to 33% of North American respondents, while, worldwide, 60% saw a net negative financial impact on account of the conflict.

As many as 20% reported a direct political risk loss in Russia or Ukraine and almost one in five experienced a material loss – defined as “sufficient to require a restatement of earnings” – largely due to exiting Russia and supply chain disruptions.

The conflict, the report states, seems “to have changed the way businesses think about political risk”, with politics and business no longer seen as separate spheres. One respondent described the war as marking a “paradigm shift”, while another termed it a “watershed moment”.

Yet 20% of businesses reported a positive or materially positive financial impact due to the war. For the six businesses headquartered in North America, more recorded a positive financial impact than a negative one, a split not reflected in any of the other geographic regions.

Positive impacts appear to have been driven by higher profits from energy, particularly LNG, and the supply of weapons to Ukraine. The report stresses that this view is not necessarily representative of every business in the region, adding that an interviewee from a US technology company said ending operations in Russia and Belarus generated a loss to their firm of almost US$1bn.

Every company surveyed reported making “at least some enhancement to their political risk management capabilities since February 2022”, such as financial hedging, strategic planning and hiring geopolitical experts. Buyers of political risk insurance also increased from 25% in 2019 to 68% this year.

The top five countries where companies suffered a political risk loss were Russia, China, India, Brazil and the UK – the latter perhaps explained by Brexit, the report suggests. Companies surveyed operate in at least two regions and across a range of sectors, including commodity trading, oil and gas, technology and manufacturing.

Unlike previous years, businesses did not have to be clients of WTW or Oxford Analytica to take part. The report’s author, Sam Wilkin, director of political risk analytics, financial solutions at WTW, notes that this was crucial for showing that political risk shifted in 2022 from a “niche concern” to “everybody’s risk”.

In terms of the loss pattern, the most recent report also marks a divergence from the usual trend of frequent small losses, limited mid-range losses and numerous large losses. Instead, 70% of losses were less than US$50mn, while only 2% were very large, coming in at over US$250mn.

The report says that the majority of respondents felt geopolitical trends like deglobalisation, populist politics and geostrategic competition between world powers would strengthen, while the top risks companies were worried about going forward were the effects of war in Ukraine, decoupling from China, and the energy crisis and scope of regulation in the EU.

Other risks that made the top 10 were economic nationalism, the costs of ESG, instability in developed nations and the possibility of a conflict involving Taiwan.

The report also flags the political impacts of climate change as a risk that may rise through the ranks in years to come, as well as debt crises in emerging markets.