Political polarisation reaches record highs - what it means for risk managers

Political polarisation has become one of the most urgent challenges facing global businesses, according to Willis Towers Watson’s 2025 Political Risk Index.

The report shows that affective polarisation, the degree to which individuals view political opponents with hostility, has surged worldwide, posing significant implications for operational risk, workforce cohesion, and policy predictability.

“Polarisation is also being felt on a more personal basis, such as how we perceive our friends and colleagues,” said Sam Wilkin, director of political risk analytics at Willis. “Businesses face growing challenges from operating in increasingly polarised societies.”

The report shows that polarisation has risen fastest in democracies, with the United States, Germany, India, Brazil and Bulgaria all showing rapid increases. But fragile and authoritarian states are not immune. Many of the most polarised nations today are those with ongoing ethnic, religious or geopolitical conflict, including Syria, Myanmar, Lebanon and Ethiopia.

Three forms of polarisation, three levels of risk

The Political Risk Index focuses on three distinct types of polarisation:

• Affective polarisation: how much people dislike those from opposing political parties
• Ideological polarisation: the extent of disagreement on core issues like tax, religion, or foreign policy
• Elite polarisation: how willing political leaders are to recognise rivals as legitimate

Of the 170 countries assessed, the United States is the only one where all three types of polarisation have risen sharply and simultaneously over the past 15 years. Although other countries, such as India, Brazil and Pakistan, rank higher on individual measures, no other nation has experienced the same compound acceleration.

According to Wilkin, the correlation between all three forms of polarisation and political violence is strong. Across more than a century of global data, the single factor most closely linked to rising affective polarisation is non-state political violence, including terrorism, riots and assassination. Ideological polarisation is similarly associated with organised group violence and unrest.

The business impacts: from unrest to reputational backlash

For risk managers, the implications of this trend are wide-ranging. According to the report, polarisation contributes to:

• Policy volatility, particularly around contentious sectors such as energy, immigration, and ESG
• Reputational risk, where brand alignment with social causes can trigger backlash
• Workplace disruption, including tension, disengagement and even insider threats
• Operational threats, as polarisation increases the likelihood of strikes, protests or civil unrest

In extreme cases, public anger triggered by specific policies has already led to major disruption. The report cites examples including the yellow vest protests in France, subway fare riots in Chile, and unrest in Bangladesh that forced a government to flee. In the US, recent immigration reforms have sparked protests in multiple cities.

The research also shows a strong link between polarisation and the rise of populist movements, particularly in democracies affected by economic crises or corruption scandals. Populists often emerge in the wake of collapsing trust in traditional political parties, then accelerate division by undermining institutional norms and framing elites as enemies of the people.

But Willis experts caution that populism is not confined to any one ideology. While many populist leaders are nationalist conservatives, left-wing “class warrior” populists in Colombia and Mexico are also reshaping their political systems through aggressive attacks on institutional power.

Mapping global trends: different risks, different regions

The report draws on data from the Varieties of Democracy project, Oxford Analytica, and the Fragile States Index to classify 40 countries into different polarisation archetypes:

• “Countries without politics”, like China and Saudi Arabia, appear less polarised due to authoritarian control, though risk surges can occur when repression breaks down
• “Ethnic competitors”, such as Ethiopia, Iraq and Nigeria, face the most dangerous forms of affective polarisation along tribal, religious or regional lines
• “Young vs old regimes”, in countries like Bangladesh and Indonesia, where politically mobilised youth are confronting long-standing elites
• “New populists”, including Brazil, India and Turkey, whose leaders frame themselves as anti-establishment reformers
• “Geopolitically divided” countries, such as Lebanon and Taiwan, where foreign alignments drive internal fractures
• “Polarising figures”, like Imran Khan in Pakistan or Kais Saied in Tunisia, whose personal dominance exacerbates national divides

In some cases, the research notes, even formerly stable democracies have experienced reversals. The report highlights that Iceland is the only major success story from the past 20 years, where a combination of high-profile corruption trials and cross-party governance helped bring about a significant reduction in polarisation.

Practical considerations for risk managers

While the Political Risk Index does not offer prescriptive solutions, its findings suggest several risk management priorities for organisations operating in polarised environments:

• Scenario planning to anticipate sharp swings in regulation and political instability, especially after elections or protests
• Board-level awareness is vital when taking public stances on ESG or social issues, given the potential for backlash
• Crisis planning should incorporate risks tied to reputational attacks, protest movements and online outrage cycles
• Employee relations strategies may need to address ideological divisions within the workforce and focus on psychological safety, trust and insider risk

These insights are not new, but they are becoming more urgent. As the report makes clear, polarisation is not just a macro-level issue, it touches the social fabric in which businesses operate, shaping both strategy and day-to-day resilience.