IHRR Fellow awarded €100,000 to launch Political Risk Laboratory

Professor Stavros Zenios, IHRR Fellow and Professor of Finance and Management Science at Durham University Business School and the University of Cyprus, has been awarded €100,000 to establish a Political Risk Laboratory (PoliRiskLab) at the Cyprus Academy of Sciences, Letters and Arts, where he is a founding member.

The 24-month project, Aggregate Confusion in Political Risk: Robust Approaches to Measuring and Hedging, runs to February 2028 under the Foundation's programme, co-funded by the Republic of Cyprus and the European Regional Development Fund.

Political risk — from elections and trade wars to geopolitical crises — shapes financial markets, supply chains and the fiscal stability of states. Yet the international indices that measure it diverge sharply, a problem documented in a recent Bruegel Policy Analysis by Gala, Pagliardi, Shaliastovich, and Zenios (2026). This is analogous to the "aggregate confusion" identified in ESG ratings. The project uses machine learning to extract more informative risk measures from these conflicting sources, and robust optimization methods to turn them into decisions for international portfolios, supply chains under geopolitical fragmentation, and the exposures of banks and insurers.

The work connects directly with IHRR's strengths through its focus on systemic political risk and regime shifts, alongside collaborations with Durham's Data Science Institute and the Centre for Strategy, Information and Operations. The laboratory will join the international RiskLab Global Academic Network. A post-doctoral research assistant in machine learning will be recruited, with an expected start in summer 2026.

The research programme is also reaching Durham's classrooms. From January, Professor Zenios offers a new graduate module, Risk and Crisis Management for Enterprises, which takes the same broad view of risk that animates the laboratory. Alongside the principles of risk identification, measurement and mitigation, and the crisis management that follows when mitigation fails, the module gives sustained attention to the challenges now reshaping the field: political and geopolitical risk, the risks arising from climate change, and those introduced by the rapid adoption of artificial intelligence. Students work with scenario analysis, stress testing and Value-at-Risk across settings from global supply chains to power utilities and financial institutions, with a deliberate focus on real-world examples of failed responses.

IMAGE - Political ratings do not move in tandem If the ratings by six political raters were perfectly aligned, all the points would be on a 45-degree line.