Welcome/Executive Summary
by Evan Freely, Global Head of Willis Credit Risk Solutions
H1 2025
In our 8th annual political risk survey, published a month ago, we found that political polarization had leapt to second place among corporate political concerns – second only to geostrategic competition amongst rival great powers. Political polarization may not have the obvious high stakes of the conflict in Ukraine or the measurable business impact of changes in tariff policies. But polarization is more personal – it creates challenges not only of risk assessment and loss mitigation but how we perceive our friends and colleagues.
The focus of our research in this edition of the Index is affective polarization (the degree to which people tend to perceive supporters of other political parties as hostile). Affective polarization appears to have increased dramatically, worldwide, since 2000, reaching levels unprecedented in modern history. This trend is most dramatic in democracies like the U.S. (where the trend started decades earlier), Germany, India, Brazil, and Bulgaria.
The Index also covers elite polarization (the degree to which political rivals consider each other as legitimate) and ideological polarization (the degree to which people agree on core policy issues). All forms of polarization have been rising rapidly in recent years, on a global average basis, posing challenges for business as changes in political leadership produce unpredictable oscillations in government policies.
Reviewing data on more than 200 countries over more than a hundred years of history, we find that, in democracies, surges in polarization tend to follow economic crises or corruption scandals, which appear to discredit traditional political leaders. Rising polarization tends to be accompanied by the rise to power of populist political movements and an increased frequency of political violence.
Among the 40 countries profiled in detail in this Index, we identified several patterns of polarization:
Some of the highest levels of affective polarization globally are found in countries where political competition happens along ethnic or religious lines (e.g., Ethiopia, Nigeria).
A notable trend is polarization along generational divides, with young people sometimes leading opposition to aging regimes (e.g., Bangladesh).
Polarization and populism are correlated not only in the U.S. and Europe but in the emerging world as well. Emerging market populists are sometimes sympathetic to rich-world populists or use similar political tactics, although the demographics of their supporters tend to be dramatically different (e.g., India).
Long-serving political leaders and controversial populists have become a polarizing force in many countries, such as Pakistan, Tunisia, and Thailand.
Geopolitical and foreign policy divides have led to polarization of societies in places such as Taiwan and Lebanon.
The news is not all negative. Truth and reconciliation processes (e.g., in Chile, Uruguay, and East Timor), cross-party coalitions, and open and transparent investigations of crises (e.g., in Iceland) have been accompanied by reductions in polarization in the past. The Oxford Analytica experts who author the country profiles in this Index expect that such processes may alleviate polarization in Chile and Senegal in the future.
For the time being businesses must navigate a world in which political polarization is high or rising. Workforce tensions, policy volatility, and violence risks are just some of the challenges. We hope that the research and profiles in this Index will provide some guidance on the drivers of these risks and where risks are most acute.
Evan FreelyGlobal Head of Willis Credit Risk Solutions
