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Geopolitical and Economic Risks in a Globalized World

5 minutes 5 Questions

In today's highly interconnected global economy, geopolitical and economic risks have become more prominent and impactful on businesses than ever before. Factors such as political instability, trade tensions, regulatory changes, and economic sanctions can disrupt international operations, supply ch…

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PMI-RMP - Geopolitical and Economic Risks in a Globalized World Example Questions

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Question 1

Which geopolitical risk assessment method best addresses risks in cross-border projects involving multiple sovereign nations?

Correct Answer: Political Economic Governance Analysis (PEGA)

Political Economic Governance Analysis (PEGA) is the most appropriate method for assessing geopolitical risks in cross-border projects involving multiple sovereign nations for several key reasons: 1. PEGA specifically focuses on both political and economic factors, which are crucial in multi-nation projects 2. It provides a comprehensive framework for analyzing governance structures across different political systems 3. It enables assessment of interconnected relationships between various political entities 4. It considers economic dependencies and potential conflicts between participating nations The other options are less suitable because: Stakeholder Engagement and Diplomatic Relations Framework is too narrow in scope, focusing mainly on relationships rather than comprehensive risk assessment. International Compliance and Regulatory Assessment Matrix emphasizes regulatory compliance but lacks depth in political and economic risk analysis. Global Strategic Risk Assessment Protocol is too broad and generic, lacking the specific focus needed for analyzing sovereign nation interactions and their unique political-economic dynamics.

Question 2

When managing a global project portfolio affected by trade sanctions, which risk mitigation approach provides the most effective long-term protection?

Correct Answer: Diversifying suppliers across multiple trade zones

Diversifying suppliers across multiple trade zones is the most effective long-term risk mitigation approach for managing a global project portfolio affected by trade sanctions because: 1. It reduces dependency on any single trade zone or geographic region 2. Creates resilience against regional political changes and sanctions 3. Maintains operational continuity even if certain trade relationships become restricted 4. Allows for quick adaptation to changing geopolitical situations Why other approaches are less effective: Legal frameworks, while important, cannot override international sanctions and may become invalid when political situations change. Creating parallel supply chains in politically aligned countries still leaves vulnerability to political shifts and alliance changes, potentially requiring complete system rebuilds. Compliance monitoring systems are reactive rather than proactive - they help ensure adherence to existing sanctions but don't protect against future disruptions. Diversification provides the most comprehensive protection by spreading risk across multiple jurisdictions, ensuring business continuity regardless of individual trade restrictions or political changes.

Question 3

Which of the following risk indicators would provide the most reliable early warning of potential political instability in an emerging market where your project operates?

Correct Answer: Social unrest frequency and unemployment rate trends over the past 24 months

Social unrest frequency and unemployment rate trends are the most reliable early warning indicators for several reasons: First, these indicators are leading (forward-looking) metrics that can predict future instability, rather than lagging indicators that only show past performance. Second, they directly measure social and economic pressures at the population level, which are primary drivers of political instability. Third, the 24-month timeframe provides enough historical data to identify meaningful patterns while remaining current enough to be relevant. The other options are less effective because: GDP and FDI statistics are lagging indicators that show past economic performance but may not reflect current social tensions. Government credit ratings and trade statistics are primarily financial indicators that may remain stable even as internal political tensions rise. Sovereign debt ratings and inflation rates are important economic indicators but are often slower to reflect growing political instability compared to social metrics.

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