Aon’s 2017 Risk Maps for Political Risk, Terrorism, and Political Violence was released recently, citing that companies with domestic and international operations, including global logistics service providers, face a rise in terrorism risk as attacks increased by 14% last year. In addition, the wave of populism in the United States and elsewhere is changing the political risk climate, according to the report.
Western countries saw the greatest percentage increase in the frequency of terrorist violence of all regions in 2016, with a 174% rise in incidents, although it’s important to note these countries still are the least affected by terrorist attacks worldwide. The risk level for the U.S. increased to medium due to terrorism and civil unrest. The rise in terrorist threats, says the report, impacts everything from loss of life to business interruption and disruption in the supply chain. Other violent risks are also evolving at the geopolitical level, leading to increased defense spending, greater authoritarian governments and a weakening consensus between states. These developments have underlined the importance of considering crisis management perils that not only result in property damage but also serve to disrupt industry sectors as oil and gas, transport and retail.
“The shifting dynamics around terrorism and political violence, reflected in the global events seen in 2016, are presenting an increasing challenge for companies,” commented Scott Bolton, Director, Crisis Management. “Those with both domestic and international footprints have the potential to experience events that could impact their people, operations, and assets. If we can understand what might reasonably impact an organization and its people, then we are better able to apply ‘best fit’, consistent approaches to managing risk.”
The Spread of Populism
The rise of populism here and in Europe also has the potential to impact the political risk climate, according to the Aon report. For example, the policies being proposed by the U.S, Administration are expected to impact a range of policy areas important for political risk in the emerging world, including immigration, tax, exchange rates and international trade and investment. These will challenge the resilience of selected emerging and frontier markets, says the report. Although the scope and scale of the Trump administration’s policies are as yet unclear, proposed policies include trade and investment restrictions, greater government spending and lower taxes, resulting in wider fiscal deficits (and greater debt levels) and restrictions on immigration. Overall, these along with the potential for reactions from other major economies would likely lead to an increase in political risk in many of the countries that the Risk Map covers, according to the report.
“In the wake of policy uncertainty in developed economies such as the U.S. and Europe, major trading partners in Asia, as well as commodity producers in Sub-Saharan Africa and the Middle East and North Africa, seem most exposed,” said Rachel Ziemba, Managing Director Emerging Markets, Roubini Global Economics. “Given the focus on trade, currency and migration renegotiation, we are watching for increases in exchange transfer risk, supply chain disruption and government interference in the economy. Within these regions, we see meaningful differentiation, with the richer countries of the Gulf Cooperation Council outperforming regional peers.”
About Roanoke Underwriting
Roanoke Underwriting will continue to keep our agency partners abreast of changes that can impact trade, global logistics service providers, and trade. We serve the commercial marine insurance and customs bond needs of agents and brokers throughout North America working with supply chain risks and logistics service providers. For more information about our products, please contact us at 1.855.213.4545.