Investment Risk: Regional Game

With volatility in geopolitical and geoeconomical dynamics in regional and global eco system, its utmost necessary to continuously evaluate the investment risk to secure interest of shareholders at any given point of time. Multiple factors to be considered in the evaluation, be it behavioral patterns, regional necessities, political perceptions, inflation indicators, money supply, capital interest rates, social developments, demand supply situations, political agenda, standard of living, value of money to name few.

If you look back few decades ago, most investments were driven by cost savings, ease of doing business, multifold growth, globalization, altering supply dynamics, influencing demand by incentivization. Now we might see slightly different philosophy across the globe, its more to secure interest of country or regions. If you are stuck in an earlier thought process, then your business is at risk in the long term.

Here are highlights of few regional risks to help you to evaluate your future plans:

United States: Interest rates increasing rapidly increasing monitory burden on individual and corporates, it will certainly reduce supply of money in the market, moreover people will be more cautious where to spend. This will certainly affect demand in certain areas specially FMCG sector. Dynamics with China has already started impacting cost of goods, projects, and services. Cautious approach in most of the sectors except renewable energy and semiconductors. Even renewable would see significant impact on cost hence many investments to be revaluated. The automobile sector would see good sustainable growth due to it being the primary mode of transport in the country. O&G remains quick win area but with high risk and redundancy of resources.

Europe/UK: Availability of skilled labor is continued struggle in this region, cost of living going up, interest rates high, expensive infrastructure would put dent on new expansion or investments. In addition, regional geopolitical stress is making things difficult. This region would remain “wait and watch” until regional political dynamics improves, standard of living improves.

India: Political regime has eased a bit “red tapism” but within country there is wide regional diversity where you invest. Deep dive investment risk analysis to be done before plunging into any major investment. Due to high cost of capital in India, external investments get higher returns but select right partner for any of these risk portfolios. Ethical values and integrity to be assessed for each investment partnership. Wide variety of consumer base with increasing middle class would ensure longevity of investment. Again, selecting the right partner for evaluation and investment would remain key.

SouthEast Asia: High Political turmoil would challenge investment plan but again high-risk high gain in these countries. The banking system is very rigid and high interest rates would strain the systems but availability of large consumer base and increasing middle class is always helps to secure some of risk in the region.

Middle East: Deep dive country specific risk assessments to be done, instant changes in the policy might risk the investment but initial returns would seem promising. Distribution of money in some of the specific countries is controlled hence sector specific footprint to be looked at. Chinese investment and influence are predominant in these countries. If you are a US investor/corporation, please do deep dive and detailed risk evaluation for your investment since dynamics could be influenced fairly quickly affecting you adversely. Avoid the herd mentality!

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