Developing a Model for Assessment of Political Risk in the Hashemite Kingdom of Jordan

Responding to the unexpected events that erupted across the Middle East and North Africa (MENA) during the 2011 Arab Spring, the objective of this study was to develop a model for Booz Allen Hamilton (BAH) that analyzes political and economic risk in MENA using the Hashemite Kingdom of Jordan as an example.

The first objective was to qualitatively assess major drivers of change in the region; this analysis included three in-depth case studies within the broader context of recent MENA events. The resultant model constructed relied on this qualitative assessment to inform variable selection for a series of logistic regression analyses. These analyses sought to predict the occurrence of specific “shock” that represented threats to regime stability or risks to investment in a given country. Using the probabilities predicted by the logistic regressions, relative country risk could be assessed across the region. Due to limited observations in the MENA region, ‘Regime Change’ was the only shock included in this iteration of the model. In general, the model effectively ranked the regime stability of most countries in the Middle East prior to the Arab Spring. In the case of Jordan, the model’s projected instability peaked in 2011, corresponding with our qualitative assessment, and has declined year over year since then.

Viewing this iteration as a trial for future development of BAH’s political risk assessment services, the necessary enhancements identified include constructing a more comprehensive and nuanced data set through effective data sourcing, expanding regional focused data subsets, and developing an extensive list of shocks based on client needs.