Source: Fortune
Summary
Companies like Citigroup and Morgan Stanley warn that traditional risk models are no longer effective in predicting geopolitical conflicts. Verisk Maplecroft has developed a Predictive War Index, which uses machine learning to forecast the likelihood of war occurring in a country over the next 12 months. The model was trained on political, economic, and social datasets from 1995-2022. Rand Corporation has also developed an artificial-intelligence model that turns complex and uncertain questions into concrete probability estimates. The number of countries engaged in external conflicts has nearly doubled since 2008, and the economic impact of violence now stands at almost $22 trillion.
Our Reading
The numbers tell one story.
Verisk Maplecroft’s Predictive War Index gives a 66% probability of war breaking out in Iran 1 1/2 months before it happened. Citigroup warns against relying on “rear-view mirror” models built on historical data. Morgan Stanley says it’s time to “rethink” the status quo of geopolitical risks. Rand Corporation’s model shows a 20% likelihood that Iran’s regime won’t survive into 2027. Verisk’s model correctly predicted six out of seven government collapses, including the ouster of Bashar al-Assad in Syria in 2024.
The announcement sounds familiar: war is a rising fear for businesses around the world, and companies are scrambling to adapt their risk models to predict military conflicts.
Author: Evan Null
