Geopolitical risk refers to the risk of investing in a country where there is political or economic instability that may cause a threat to the value of the investment. This threat may come from regime change, legislative change, military intervention or some other destabilising force that may substantially impact the value of the investment. Many people use economic theory to understand the market without realising that politics can be just as important in critical decision. Geopolitical risk differs from financial, economic and environmental risk in that it is usually the result of human activity and usually connected to political elites. It can be useful, therefore, to monitor how decisions are made within governing elites, what their incentives are, the power dynamics and global pressures that influence decision making. Decisions taken by these small power groups in capital cities can have an effect on markets and lives in various other regions around the world, and can significantly shape the investment environment for several years to come. The biggest challenge when it comes to geopolitical risk is that predicting the future is not an easy task. To prepare for this kind of risk requires an understanding of the probability that a particular political action or event will occur, and the after effects of that event, which will impact on investment value. It is possible, however, to establish trends and apply psychological insight to a situation, but this requires key skills and expertise. If you are able to understand the features, and apply knowledge of, human nature, you may be able to predict likely outcomes with some degree of success. Unfortunately, people often mistakenly rely on quantity data in a bid to gain insight future trends, but this may not be enough - we need to understand in the context in which the data exists. It is useful to build a series of future scenarios and be able to comfortably predict from these which is the most likely to occur, based on characteristics such as past behaviour, personality of key actors, global forces and political culture. This requires expertise that is not often found within companies and companies are advised to seek expert help in helping to possible outcomes. Listen as Rear Admiral Chris Parry, a well known military strategist, discusses the importance of understanding geopolitical risk, and how gaining a perspective can help a company’s long term survival.