Introduction

1. The Geopolitical Risk Index (GRI) is a measure of geopolitical tensions based on news coverage. It analyzes reports from ten newspapers and tracks the number of articles discussing adverse geopolitical events each month, relative to the total number of articles published.

2. The Geopolitical Risk Index (GPR) is a crucial tool for governments, businesses, and investors to assess and anticipate the effects of political instability. A lower GRI value indicates lower geopolitical risk, while a higher value suggests increased instability. 

3. According to the Economic Survey 2023-24, the Geopolitical Risk Index experienced a sharp increase following the escalation of global conflicts but later declined. However, geopolitical risks remain high and could worsen in the near future.
4. Key Trends in the Geopolitical Risk Index:

• 2023 GRI Score: 121.7, which is 27% higher than the average from 2011-2019 (95.2).
• Decline from 2022: The index fell from 157.6 in 2022 to 121.7 in 2023, signaling a temporary reduction in geopolitical risks for equity investments.
• Uncertainty Remains: Despite the drop, the Economic Survey warns of persistent risks, with potential for further escalation.

Importance of the Geopolitical Risk Index : Geopolitical risks emerge from political, social, economic, or military conflicts, which can:

• Destabilize financial markets
• Affect investment performance
• Disrupt global trade and supply chains, even in countries not directly  involved in the conflict

Why the Geopolitical Risk Index Matters

• Economic and Financial Market Stability
• Geopolitical events such as wars, sanctions, and political conflicts create market volatility, affecting stock prices, exchange rates, and commodity prices (oil, gas, etc.).
• Central banks and policymakers use the GPR to adjust monetary policies and economic strategies.
• Business and Investment Decision-Making
• Investors rely on the index to identify safe and risky markets before making long-term commitments.
• Multinational corporations use it to adjust supply chains, trade strategies, and expansion plans based on geopolitical stability.
• Energy and Supply Chain Security
• Geopolitical tensions disrupt oil and gas supplies, shipping routes, and trade networks (e.g., the Russia-Ukraine war).
• Governments and industries diversify energy sources and secure supply chains using GPR insights.
• Policy and National Security Planning
• Governments and intelligence agencies monitor conflicts, trade wars, and diplomatic tensions through the index.
• It helps in crisis management and foreign policy decisions.
• Global Risk Awareness & Crisis Preparedness
• The GPR alerts businesses and policymakers to emerging risks, enabling proactive decision-making.
• It aids in disaster planning and preparing for political unrest, wars, and sanctions.

Recent Trends in Geopolitical Risk

1. Trade Tensions and Market Volatility : Trade disputes between major economies like the U.S. and China continue to fuel market uncertainties. 
2. Concerns about a potential U.S. recession, worsened by trade wars, have caused sell-offs in global stock markets.
3. Regional Conflicts and Economic Policies : The world is shifting towards a tripolar power structure dominated by the U.S., China, and Europe.
4. This regionalization is reshaping global economic and political dynamics, creating challenges in international relations and economic policies.

Impact of Geopolitical Risks on Key Industries

1. Legal Industry
2. Shipping and Logistics
3. Energy Sector
4. Manufacturing and Supply Chains

Conclusion

The Geopolitical Risk Index (GPR) is essential for businesses, governments, and investors to navigate global uncertainties. With rising trade tensions, regional conflicts, supply chain disruptions, and market volatility, the index serves as a strategic tool for informed decision-making.

By monitoring geopolitical trends and industry-specific risks, stakeholders can develop proactive strategies to mitigate potential economic and security threats, ensuring long-term stability and resilience in an increasingly unpredictable world.