Geopolitical risk (GPR) is “the risk associated with wars, terrorist acts, and tensions between states affecting the normal and peaceful course of international relations.” Since the introduction of the GPR index by Caldara and Iacoviello (2022), the literature has shown a growing interest in using the index as a measure of uncertainty. Recent studies have examined the effects of GPR on managerial decisions and corporate outcomes in hospitality, shipping, oil, energy and electric power, and banking sectors. However, there is still scant research on how metals and mining firms are affected by GPR.

Traditionally, projects in the metals and mining industry are characterized as capital intensive, long term, complex, highly uncertain and where investments are predominantly sunk. Thus, firms operate under a rigid capital allocation framework where investment decisions are more rigorous and demand stricter scrutiny of project risks. This industry is also typically open to international trade and, hence, is highly integrated into the global economy and more susceptible to macroeconomic volatility. This implies that in the already complex investment environment surrounding the industry, firms need to be extremely cautious in making investment decisions when faced with GPR.

Can GPR analysis aid firms in optimizing their capital investment decisions? The seminar will present a study applying GPR analysis to the Australian metals and mining industry and discuss its application to Indonesia.

The presentation is based on a forthcoming paper in the Pacific–Basin Finance Journal.

Speaker: Lawren Julio Rumokoy (Universitas Sam Ratulangi)

Tuesday, 21 March 2023 at 9-10.30am WIB/10-11.30am WITA

Online on Zoom. Register bit.ly/fkp0321

Thumbnail photo by Dominik Vanyi on Unsplash