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How is politics impacting business for banks and financial institutions?

By Jonathan Barrett, SVP EMEA and APAC, Dataminr

Finance executives and banking professionals always have one eye on the news—and for a good reason. When financial and corporate security is at stake, the uncertainty brought about by political issues should always be factored into business decisions.

It stands to reason that businesses should stay abreast of what’s happening domestically. Banks and financial institutions in the UK are well aware of the ongoing political turmoil and the impact on the UK economy of extreme weather, technological developments, and the declining high street. Retail sales are dropping, and economists predict more of the same in the months to come.

An analysis conducted by the Organisation for Economic Co-operation and Development (OECD) that recently featured inThe Guardian indicates that a “no-deal Brexit” situation—in which the UK would withdraw from the European Union without any trade deals in place—stands to cut UK economic growth by 3 per cent over the next three years, compared with 0.6 per cent in the rest of the EU. Unsurprisingly, this is information that every bank and investment firm needs to know.

But what of the political news in other regions, areas that may offer new business and expansion opportunities? In many ways, geopolitical issues are just as important as local economic trends. For example, banks looking to do business in the US need to be aware of its debt ceiling and the potential impact on trade due to the upcoming US presidential elections. Without this knowledge, businesses may find themselves unprepared to protect their customers, their employees, and their brands.

Risky Business

According to J.P. Morgan, geopolitical risk is on the rise. From trade negotiations between the US and China to Venezuela’s economic crisis, businesses everywhere are struggling to stay abreast of emerging events in the face of geopolitical volatility and uncertainty, which in turn has a fundamental impact on world markets and international trade.

“Financial markets around the world are increasingly being pushed and pulled by geopolitical dynamics,”J.P. Morgan reports. Such events put financial companies in the awkward position of having to anticipate change in an unfamiliar and increasingly unstable political landscape. And when a company is new to a region as a result of corporate expansion, understanding the market is paramount.

Global professional services firm KPMG explored this same subject in a report titled,Navigating the Impact of Geopolitical Change on Banking Regulation. According to KPMG, in addition to reacting to new geopolitical events, many are trying to “better anticipate future changes via horizon scanning.” To effectively defend themselves against risk, financial professionals must seek out relevant geopolitical information, both in the form of everyday global events and during times of crisis.

Market Insights and the Value of Real-Time Intelligence

The logical way to do this is by taking advantage of real-time alerts designed to inform executives of critical breaking news and the status of ongoing political events.

Real-time alerting driven by artificial intelligence (AI), and insights from multiple data sets that include blogs, publicly available data, social media and the dark web, doesn’t just help financial institutions protect themselves in a volatile economic environment but also defends against potentially disastrous business manoeuvres. The early detection of events that could affect global markets, along with the ability to eliminate “noise” and zero in on only the most pertinent information, enables banks and financial institutions to move ahead of emerging trends. Besides, early access to knowledge and insights enables leadership teams to make more educated decisions about expansion to new regions, introducing new services, headcount and other internal and external investments.

Whether a market is growing or in a state of decline, businesses need to know about it so they can respond decisively, leverage opportunities, and mitigate risk. What’s more, the data accessed by financial professionals must be as current as possible—another area where real-time intelligence can help.

Diverse Data, Invaluable Information

To gain a deeper and more comprehensive understanding of the geopolitical landscape, many business professionals are now turning to a variety of alternative data sources, particularly at times when markets are in a state of crisis.

One example is data from satellites. On significant shopping days, like Boxing Day, analysts can reference satellite data to predict foot traffic and sales. Even car park usage data can be leveraged to forecast in-store purchases. Social media posts, credit card transactions, point-of-sale transactions, and weather reports all help businesses better prepare for upcoming events. The more traditional market, pricing, and economic data sources don’t tell the whole story, especially when evolving geopolitical issues are concerned.

At a time when businesses wish to remain acutely aware of political shifts, technological advancements, and other events that stand to affect their success, AI-powered, real-time alerts are indispensable. There are indisputable business advantages to these tools, but it behoves us to note that the additional purposes they serve—from helping brands allocate resources to protecting brands and even saving lives—are worthy of our attention