In Search of Stable Markets

Risk analysts try to reduce the danger of investing overseas

Doing business abroad can be an invitation to agony. From the uncertain politics of such advanced countries as France and Canada, to the nationalizations and revolutions that have convulsed Iran and Nicaragua, a lack of sensitivity to local conditions can exact a high penalty from the unprepared businessman.

As worldwide economic and political conditions continue to churn, more and more corporate managers are turning to political risk analysts for advice. Large oil companies and banks have always had in-house analysts to weigh the stability of nations and regions. But a survey last year by the Conference Board, a New York business study group, found that smaller and less wealthy firms are now beginning to seek out specialists as well.

The analysis ranges from assigning junior executives to keep watch over a potential foreign hot spot, to the elaborate computerized system that American Can Co. set up in 1978 to rank investment risks in some 70 different countries. Many smaller companies hire outside consultants like Chicago's Associated Consultants International and Boston's Arthur D. Little Inc. to provide political risk assessments. Amartic Ltd. was founded two years ago by Talib El-Shibib, a former Arab League Ambassador to the United Nations, to advise companies on political conditions in the Middle East. Argen Ltd. of London is a savvy European consulting group that offers a broad range of security and risk management services to multinational companies.

Political risk analysts are often ex-foreign service officers with overseas experience in various Third World countries. But sometimes they are academics or even young graduates with degrees in political science. Their firms can be partnerships with only two or three consultants, or gigantic enterprises like New York's Business International, which has offices in 75 countries. The president of Business International is Orville L. Freeman, former Governor of Minnesota and Secretary of Agriculture in the Kennedy and Johnson Administrations.

The services offered are as varied as the firms themselves. Business International provides individual consulting for specific corporate clients by offering the Critical Issues Monitoring Service. The company recently concluded that in terms of overall risk, the safest country to invest in is Singapore, followed by Japan and The Netherlands. The U.S. is ranked fourth safest and West Germany ninth.

Probe International, a small Stamford, Conn., firm headed by Benjamin Weiner, a former foreign service officer, offers its own custom-tailored reports. When one American multinational asked Weiner to determine whether it was safe to set up an assembly plant in Sri Lanka, he spent months interviewing government officials and members of the opposition party in the capital of Colombo, then advised going ahead, though he cautioned that both the regime in power and the opposition should first make it clear that they would actually welcome the project.

Frost & Sullivan Inc., of New York, produces weighty monthly surveys of 61 countries, based on field reports from local correspondents. A yearly subscription to the firm's "World Political Risk Forecasts" costs $1,900, and clients include some 200 of the nation's largest corporations, including AT&T, Xerox, General Motors and General Electric.