PRS Geopolitics (Winter 2026): Two Decades With ICRG; How Geopolitical Risk Has Changed; Our Ai Work; Nigeria’s Debt Serving Issues; New Published Work.

Happy New Year to all and I hope that 2026 will bring all kinds of new experiences, joys, and life changes.

I’ve now headed PRS for going on 17 years and have been the helm of the International Country Risk Guide (ICRG) now for 20 years.  Time has flown by – as they say – and the field of geopolitical risk and forecasting has undergone many changes since the time I first entered the industry in the 1990s when I was teaching at the University of British Columbia.

When I began in the field the internet was in its infancy and was not a reliable source of information in any way.  Country analysts had to have significant local experience, and a range of sources were consulted to form forecasts and ratings.  The only significant text on the subject was the (still) brilliant work by Michel-Henry Bouchet, Ephraim Clark, and Bertrand Groslambert, titled Country Risk Assessment: A Guide to Global Investment Strategy.  The book opened a world of new possibilities for me as an academic that consistently worked outside the confines of the university to use various skills in ways that had a more practical effect.

As the free flow of information developed in the 2000s, the need for country analysts began to diminish in our eyes in favor of those that had both a solid academic background as well as experience in fields that were key to geopolitics, whether it was finance and banking, trade, diplomacy, and so on.  As such, we looked to analysts that could use their years of experience to synthesize information and offer learned opinions on possible outcomes and the implications for international business.  

As this process continued, I began to collect a very impressive risk governance board that is key in reviewing the rating changes each month. Again, these are individuals that are well known in their respective fields and have firsthand knowledge of ‘doing deals’ in developed and/or emerging markets.  Thankfully, the board is very reflective which allows me to ask questions that border on a university seminar. I’m interested in knowing not only what’s happening as it affects the risk profile of a particular country but why? The combined approach helps us arrive at scores within the context of our risk rating methodology so clients can use the scoring across jurisdictions and across time.

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PRS now has 42 years of political risk data and over eight million vetted risk points. The data from the ICRG has now appeared in over 1,000 published articles and book chapters. This is something that makes my firm unique in the field and avails the data to a range of applications, from investment finance to corporate planning, to academic inquiry. 

Given the breadth of the data, it was natural that we entered the Ai field in 2017, testing various models and developing some of our own.  Clients have worked with us to help develop their own LLMs and the results have been impressive.  We now use various Ai applications to assist in our ratings which have provided an additional layer of nuance to the monthly results.  Combined with the oversight of the risk governance board, the combination is extremely effective.

The one piece of feedback we do receive from our clients – in terms of how PRS/ICRG fits into the burgeoning field of geopolitical Ai – is that our data provides clients with a competitive advantage as they can generate insights that their competitors – using publicly available Ai platforms – cannot. The latter are generally open source or consumer facing tools with different operational dynamics. Their output quality is only as good as their training data, which can contain biases and inaccuracies.  This stands in contrast to the ICRG data that is rigorously vetted, normalized, and validated, ensuring any subsequent Ai use is accurate and verified.

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The New Year also brings out the release of various “Top 10” risks for the year.  These sorts of things are very interesting and provide food for thought.  It’s also fun when the forecasts are ‘backtested’ at the end of the year to see how the event unfolded.  It’s an instructive exercise.

As I’ve said to (mostly) media types who have posed the question: why doesn’t PRS provide a similar list? My response is that we provide forecasts every month to over 140 countries, which are complemented by one-year and five-year outlooks. That should be sufficient.

Indeed, because of the granularity of the data we can focus on risk worthy items that are naturally missed by some of the talking heads in the field.  For example, we are looking at several countries in January 2026, with Nigeria being but one example.

As part of the ICRG risk methodology, Nigeria’s debt servicing requirements remain onerous as it is expected to consume almost half the federal government’s expected revenue in 2026. The country plans to borrow an additional $12.3 billion, with $9.8 billion coming from domestic sources and $2.4 billion from international markets. While servicing costs have come down in recent years, they are above the average for Sub-Saharan countries (about 16% of government revenues).

While the likelihood of a default is relatively low (fx reserves are fine and the country is running a current account surplus), the use of public funds to service the debt crowds out other spending priorities (social and infrastructure) which can generate other, more localized political risks.  Moreover, the recent strikes by the US in the northwest section of Nigeria could further inflame religious tensions in a country long divided along identity lines and potentially aid in insurgent recruitment.

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We are also looking at what the data provides in terms of insights into the future behavior of financial assets. So for 2026, we are generally bullish on:

South Korean equities

Chinese equities

Taiwan equities

Brazil sovereign debt (v USD)

South African sovereign debt (v USD)

EUR

GBP

SEK

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I was at the UN this December for an interesting multi-day conference on measuring corruption. Many of PRS’ clients were in attendance and the insights offered were truly impressive.  The work now being done to reduce corruption in all aspects of doing business with public authorities is becoming more empirical and many of PRS clients are making considerable progress, largely through digitization. 

As part of our new product development for 2026, PRS is currently in discussion with a French business school for the adoption of a new risk series that will serve to enhance several of our ICRG indicators as they affect forms of external conflict.  We will keep our clients and interested parties abreast of the progress on this score.

I will be in Bermuda for client meetings during the final week of December and will have news shortly on some new developments affecting various aspects of PRS on the island.

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Finally, as always, ICRG and related PRS data continue to be the gold standard of all geopolitical risk data among the scholarly and research communities. For example, in a recent study published in Conflict, Security, and Development, ICRG data was used to establish a causal link between economic conditions and social unrest.  The authors of the work found that a decrease in real wages significantly increases the risk of internal conflict, especially in nations already experiencing elevated baseline tension.  Interestingly, the study discovered that while wage decreases trigger conflict, subsequent wage increases do not consistently reduce existing conflict, except in cases of extreme political violence. 

(https://www.sciencenorway.no/forskningno-norway-social-economy/economic-under-development-leads-to-civilunrest/1432197#:~:text=The%20researchers%20tested%20the%20causal%20relationship%20between,concrete%20cases%20of%20civil%20unrest%20and%20revolts.)

And, using our ICRG data, an NBER Working Paper investigated how corporate innovation reacts to foreign political risk using ICRG metrics.  The study found that when foreign political risk increases, domestic firms often accelerate innovation as a form of strategic hedging to reduce dependence on risky international supply chains and partners. (https://lnkd.in/eEwRi_4N)

Best wishes for an enjoyable 2026!

CHRISTOPHER MCKEE, PHD CHIEF EXECUTIVE

Christopher McKee is PRS’ CEO and Owner. An international political economist, global investor, entrepreneur, and author, Chris received his PhD from Queen’s University (Canada) and has been involved in the field of geopolitical risk, limited recourse financing, and private sector development for the past 25 years.