Political Risk Index: H1 2025

Political polarization is on the rise, bringing with it increased risks from workforce tensions, political volatility and the threat of political violence. Our recent annual 2025 Political Risk Survey highlighted this trend, with political polarization being named as one of the top concerns for organizations, coming second only to geostrategic competition between major powers.

While it may not have the overtly high stakes of the conflict between Iran and Israel or the measurable business impact of changes in tariff policies, political polarization can have a profound impact on how we perceive family and friends, as well as present complex challenges for risk assessment and loss mitigation.

The rising tide of political polarization: the impact on perceptions and policies

This edition of the Political Risk Index focuses on the impact of affective polarization – the degree to which people tend to perceive supporters of the other political parties as hostile. Affective polarization has appeared to have dramatically increased globally in recent years, especially in democracies such as the U.S., Germany, India, Brazil and Bulgaria.

We also examine elite polarization, the degree to which political rivals consider each other as legitimate, as well as ideological polarization, the degree to which people agree on core policy issues. All forms of polarization have been rising rapidly, on a global average basis, posing challenges for business as changes in political leadership produce unpredictable oscillations in government policies.

Reviewing data from more than 200 countries, our analysis suggests that, in democracies, surges in polarization tend to follow economic crises or corruption scandals, which appears to discredit traditional political leaders. Rising polarization is often also accompanied by the rise to power of populist political movements and an increased frequency of political violence.

Political polarization trends, at a glance

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
• A notable trend is polarization along generational divides, with young people sometimes leading opposition to aging regimes
• Polarization and populism are correlated, not only in the U.S. and Europe, but in the emerging world as well
• Long-serving political leaders and controversial populists have become a polarizing force in many countries

Navigating political risk in an increasingly polarized world

While truth and reconciliation processes, cross-party coalitions, and open and transparent investigations of crises have been accompanied by reductions in polarization in the past, organizations will need to navigate a world in which political polarization is high or rising.

We hope the research and profiles in the Index will provide some guidance on the drivers of these risks and where risks are most acute. For further information on the Index or how to effectively manage your political risk, please contact our team.