Our increasingly interconnected world has created new dangers to conducting business that should be factored in when making important investment decisions. While our unprecedented access to technologies enables individuals to freely communicate in a blink of an eye, it also dramatically increases risk. Instantaneous communication means that change occurs rapidly, altering a risk profile overnight.
Events such as political regime changes, strikes, litigation, and violence and terrorism can inflict significant harm on substantial investments made by the public and private sector. Today’s markets require innovative solutions to mitigate the various types of social risk, so that organizations can make better informed decisions. This is especially important in the developing world, where risk can be higher because of a variety of factors including weak governance and poverty.
Today’s social challenges are unparalleled in business history, and require that companies use approaches that move far beyond traditional risk analysis. Protecting financial investments and reputations will require a more sophisticated approach that can explain and mitigate social risks that arise from populations.
Investment decisions drive the global economy, and organizations of all kinds want as much information as possible before they make major moves. Risk assessment can be greatly improved by using a population-centric analysis, which can pinpoint the drivers of instability that exist within societies. Studying a population’s profile in-depth can help predict their behavior, which can be used to more effectively allocate capital.
What is Population-Centric Analysis?
Population-centric analysis combines open source data, human networks, and non-traditional information sources to deliver a low cost, objective alternative to traditional due diligence assessments. It can be applied to any geopolitical or socioeconomic environment to create baseline social risk assessments that can be monitored over time.
Population-centric methodologies remove professional or institutional bias and enhance collaboration with stakeholders throughout the entire investment life cycle. By focusing on populations, assessments align investor and stakeholder goals and deliver objective risk analysis that represents each stakeholder’s unique perspectives. Population-centric analysis ultimately enhances traditional geopolitical, legal, regulatory, and country risk reports by placing people at the center of the analysis.
Country and geopolitical risk factors are outdated metrics that prevent investors from funding projects in new markets. Population-centric analysis delivers comprehensive historical and contemporary analysis of a society’s culture and traditions that uncovers the systemic drivers of social tension and unrest. Findings produce accurate risk assessments that inform the design of effective engagement strategies to mitigate community-based and reputational risk through tailored development programs, narrative and sentiment analysis, and persistent engagement activities. The result is an opportunity for investors to actively reduce risk and optimize long-term returns.
Investor discomfort in emerging markets is typically due to inconsistent and incomplete business intelligence that fails to accurately assess an investment’s true risk profile. A population-centric methodology delivers a repeatable process that produces quantifiable results and standardized assessments that are comparable across various industries and geographies. This methodology also creates socially responsible investments that increase local economic development while simultaneously protecting investors’ bottom line
Investment professionals need to quantify and integrate social risk analysis into their existing due diligence process or financial model. Population-centric analysis is a tool that does exactly that, helping organizations properly quantify and identify risk in a changing world.
Photo by James Cridland
James R. Sisco is the founder and President of ENODO Global, Inc. a risk advisory firm that conducts population-centric analysis to solve complex social problems in dynamic cultural environments. Jim draws upon a distinguished 23-year military career in Marine Corps Special Forces and Naval Intelligence to lead ENODO Global.
Bryan Bloom is the Chief Financial Officer of ENODO Global Inc. He leads ENODO’s finance practice to pinpoint, forecast, and mitigate social risk for financial firms to take advantage of mis-priced investments. He earned a B.A. from Colgate University with a double major in Economics and Political Science and an MBA from The Wharton School with concentrations in Finance and Management.