The due diligence process analyses financial, legal and operational aspects, but increasingly, the key element is the assessment of the geopolitical stability of the country in which we intend to invest. In the international arena, where there is no uniform order, alliances are subject to dynamic changes, and political tensions and sanctions are becoming commonplace, geopolitical analysis is often an integral part of a comprehensive assessment of the risks of cooperation with a foreign entity. Similarly, the cultural conditions of a given country. What is considered a generally accepted norm in one country may be perceived as a deviation in another, which directly affects the assessment of the credibility of a given entity.
Political stability and regulatory risks
Firstly, it is worth assessing the political stability of the country from which the entity being checked originates. Unstable governments, the risk of coups, sudden regulatory changes – all these factors constitute a risk in the context of establishing cooperation. Similarly, embargoes, sanctions or tense diplomatic relations between countries may limit our access to technology and markets. In the case of some transactions, access to raw materials may be important, as it will affect production costs and competitiveness.
Cultural and political context
The cultural and political context is equally important. In many countries, the networks of connections between decision-makers in companies and politicians or people in prominent positions can be perceived in completely different ways. In some countries, such relationships are treated as a warning sign and a potential ‘red flag’, while in others they are a prerequisite for running a successful business.
The same applies to the issue of corruption. In some countries, the mere appearance of media reports about allegations against key individuals can have real legal consequences, while in others, such practices are socially acceptable. Therefore, when conducting media research, it is important to pay attention not only to the content of the publication, but also to its source. The nature of a given source – its ideological orientation, links to interest groups or attitude towards the current government – can significantly influence the narrative and credibility of the message. Media reports are often part of a broader political game in which information is deliberately embellished or used to discredit them.
The importance of comprehensive analysis
Effective market analysis and investment planning require a perspective that goes beyond traditional financial indicators. Geopolitical assessment highlights the impact of international conditions and regional stability, while the cultural and political context provides an understanding of local realities, which often determine the success of a venture.
Summary and support options
Geopolitical and cultural-political analysis is now an indispensable part of an effective due diligence process. Taking into account the dynamics of international relations, political stability and local socio-cultural conditions not only minimises investment risk, but also allows for better preparation for cooperation with foreign partners. This approach significantly increases the chances of success in a complex and unpredictable business environment.
As part of our due diligence activities at Verificators, we provide our clients with the opportunity to conduct a geopolitical analysis, which is key to assessing the security and prospects of an investment. I am personally involved in this process as an Investigative Analyst at Verificators. I specialise in identifying and assessing risks arising from geopolitical conditions. Thanks to my experience and knowledge, I am able to provide analyses tailored to the specifics of a given market and the individual needs of the client.
Author: Paulina Marek Investigative Analyst
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