Political Risk Simulator and Calculator

Companies and organizations working in the international sector need to be able to make sense of the broader world around them--in particular its risks.

Since the onset of the Arab spring in 2011, the question of when and where the next revolution, major protest or armed conflict will occur has been one that has intrigued me, but has also been a question that could affect my work.

This is why I set out to understand how the risk of unrest might be calculated and visualized for people to better understand it. After several false starts and dead ends, I've ended up with a Political Risk Simulator and Calculator that draws on publicly available data, Bayes Theorem, methods from data science and Monte Carlo simulations--not to predict, but to simulate and provide probabilities that an event will occur this year.

Risk Map

The Risk Map allows you to explore the years 2001 - 2014, and to examine probable scenarios for 2015. Calculations are made as random distributions around the probability that major protest or armed conflict will occur. The map is set only to show those probabilities that are on the high end of the normal (Gaussian) distribution for each country. Countries with higher probabilities for unrest will appear most often.

Risk Analysis

The Risk Analysis page allows you to explore the indicators that help establish the probabilities for the risk analysis. Currently the tool only allows for the use of trends, but as I develop the tool further, I will include the ability to input indicators manually and the use of Monte Carlo simulations to provide the user more options for examining risks.

One has to remember that major protests and armed conflict actually have very low probabilities. Roughly six percent or fewer countries will have major protest in any given year. This will cause the yearly probability for any one country to decrease. Such a situation is more evident when examining the Bayesian Tree Diagram.


Bayesian Tree

 Bayesian tree diagrams are simply a manner of visualizing the calculation of probabilities based on Bayes theorem. They also help us better visualize what goes into the risk calculation. The probability of an event occurring decreases as we move from left to right. The final calculation of risk on the far left is based on the calculation of probabilities along the tree.

This tool is a work in progress. I welcome feedback and questions. 

I would also like to stress that such quantitative modeling is never the final result of risk analysis, but rather is a short-hand starting point. Country risk analysis requires time, and examination of the political, economic, social and cultural situation of a country.