Introduction to Geopolitics

Question 1

What is “Geopolitics”?

Answer 1

The study of how geography affects politics and international relations.

These relationships matter for investments because they contribute to important drivers of investment performance.

Question 2

What are “State Actors”?

Answer 2

Typically national governments, political organizations, or country leaders that exert authority over a country’s national security and resources.

Examples:
- The South African President

• Sultan of Brunei

Question 3

What are “non-state” actors?

Answer 3

Those that participate in global political, economic, or financial affairs but do not directly control national security or country resources.

Examples:
Non-government organizations (NGOs), multinational-companies, and even influential individuals (such as Elon Musk).

Question 4

What is “Cooperation”?

Answer 4

The process by which countries work together toward some shared goal or purpose.

Question 5

What is a “Cooperative Country”?

Answer 5

A country that engages and reciprocates in rules standardization; harmonization of tariffs; international agreements on trade; immigration or regulation.

Question 6

What is a “Non-Cooperative Country”?

Answer 6

A country with inconsistent and even arbitrary rules; restricted movement of goods, services, people, and capital across borders; retaliation; and limited technology exchange.

Question 7

What is a “Geophysical Resource Endowment”?

Answer 7

Refers to factors such as livable geography, climate, as well as food and water, which are all necessary for sustainable growth.

Is highly unequal among countries.

Question 8

What is “Standardization”?

Answer 8

The process of creating protocols for the production, sale, transport, or use of a product or service.

Occurs when relevant parties agree to follow these protocols together.

It helps support expanded economic and financial activities, such as trade and capital flows.

Question 9

What is a “Soft Power”?

Answer 9

A means of influencing another country’s decisions without force or coercion.

‘Soft Power’ can be built over time through actions, such as cultural programs, advertisement, travel grants, and university exchange.

Question 10

What is an “Institution”?

Answer 10

An established organization or practice in a society or culture.

An “institution” can be a formal structure, such as a university, or a custom, such as “marriage”.

Question 11

What is “Globalization”?

Answer 11

The process of interaction and integration among people, companies, and governments worldwide.

It is marked by the spread of products, information, jobs, and culture across borders.

Question 12

What is “Nationalism”?

Answer 12

The promotion of a country’s own economic interests to the exclusion or detriment of the interest of other nations.

Question 13

What are “Portfolio Investment Flows”?

Answer 13

Short-term investments in foreign assets, such as stocks or bonds.

Question 14

What is “Foreign Direct Investments”?

Answer 14

Long-term investments in the productive capacity of a foreign country.

Question 15

What is “Autarky”?

Answer 15

Countries seeking political self-sufficiency with little or no external trade or finance.

Question 16

What is a “Hegemony”?

Answer 16

Countries that are regional or even global leaders and use their political or economic influence to control resources.

Question 17

What is “Multilateralism”?

Answer 17

The conduct of countries who participate in mutually-beneficial trade relationships and extensive rules harmonization.

Question 18

What is “Bilateralism”?

Answer 18

The conduct of political, economic, financial, or cultural cooperation between two countries.

Question 19

What is “Regionalism”?

Answer 19

In ‘regionalism’, a group of countries cooperates with one another.

Both ‘bilateralism’ and ‘regionalism’ can be conducted at the exclusion of other groups.

Question 20

What is “Cabotage”?

Answer 20

The right to transport passengers or goods within a country by a foreign firm.

Question 21

What is “Event Risk”?

Answer 21

Risk that evolves around a set of dates, such as elections, new legislation, or other date-driven milestones.

Question 22

What is “Exogenous Risk”?

Answer 22

A sudden or unanticipated risk that impacts either a country’s cooperative stance, the ability of non-state actors to globalize, or both.

Examples include:
- sudden uprisings
- invasions
- natural disasters.

Question 23

What are “Thematic Risks”?

Answer 23

Known risks that evolve and expand over a period of time.

Examples include:
- climate change, pattern migration, the rise of populist forces, and ongoing threat of terrorism.

Question 24

What does “Velocity” refer to?

Answer 24

The pace at which geopolitical risk impacts an investor portfolio.

Question 25

What is “Black Swan Risk”?

Answer 25

An event that is rare, difficult to predict, but has an important impact.

I.e. COVID-19.

Question 26

What is a “Scenario Analysis”?

Answer 26

A technique for exploring the performance and risk of an investment strategy in different structural regimes.

Question 27

What is “Groupthink”?

Answer 27

The practice of thinking or making decisions as a group in a way that discourages creativity or individual responsibility.

Question 28

What is a “Signpost”?

Answer 28

An indicator, market level, data piece, or event that signals a risk is becoming more or less likely.