Populism and terrorism converge to exacerbate global risks

Oil and gas companies were the target of 41% of terrorist attacks

Aon publishes the 2017 Risk Maps on Political Risk, Terrorism and Political Violence.

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The 14% increase in the number of terrorist attacks in 2016 and the populist nationalism are fostering an increasingly volatile operating environment for the international Business. Both Risk Maps 2017 from the risk consultant and insurance broker AON that cover the Political Risk, as well as the Terrorism and Political Violence respectively, developed in collaboration with Roubini Global Economics and The Risk Advisory GroupThey also confirm that while Western countries have experienced an increase in the number of terrorist incidents, attacks in these countries still account for less than 3% of global terrorist violence. In 2016 United States It suffered the highest number of terrorist incidents in the last decade, although according to the report the threat appears to remain moderate in 2017. 

 

Terrorism and Political Violence

 

La terrorist threat It continues to evolve, affecting a growing number of sectors in more countries with increasingly diversified tactics and a deadly objective. The impact ranges from the loss of human life to business disruption and supply chain disruption. Other violent risks are also evolving at the geopolitical level, leading to higher defense spending, an increase in authoritarian forms of government, and a weakening of consensus among states. There are few indicators of an overall improvement regarding violent risks in 2017. This development has highlighted the importance of considering the management of the dangers arising from crisis management that go beyond material damage, particularly in sectors such as oil and gas, transport and retail, which have been the most affected.

 

Victoria Ambrona, Director, Crisis Management & Environmental Risk, indicates: “In a globalized world in which the presence of the Spanish companies It is of great importance that they have access to professional advice to understand their risk exposure in the different countries where they operate and where they hold most of their assets. 2016 was a year with a significant impact from terrorism through numerous attacks perpetrated by insurgent groups, affecting not only countries where these groups have established their presence, but also, significantly, in Western EuropeIt is vital that our companies understand the need to have adequate protection as part of their “duty of care”.

 

Henry Wilkinson, Head of Intelligence & Analysis at Risk Advisory“International politics in 2017 is moving towards increased violence and crisis. The balance of violent risks is beginning to tip again towards state-linked actors versus independent actors. Terrorism linked to Islamic State and Al-Qaeda It remains a critical threat, affecting dozens of countries and key sectors, including oil and gas, aviation, tourism, trade, and communications. However, in 2017, companies must develop strategies to address additional risks stemming from the geopolitical landscape. Authoritarian nationalism is on the rise, and with it, the risks of crises and interstate conflicts, coups and rebellions, as well as political risks.

 

 

In 2016, there was a 14% increase in the number of terrorist attacks worldwide, reaching 4.151 compared to 3.633 in 2015. Western countries experienced a 174% increase in the number of terrorist attacks in 2016, rising from 35 attacks in 2015 to 96 attacks in 2016.

 

 

 

Political Risk

 

The risks associated with populism and protectionism in developed economies can increase political risk in emerging and frontier markets as their resilience is tested. Although the level of political risk remains high, especially in Middle East and AfricaReform efforts and economic adjustments in the past have increased resilience. Energy markets will continue to influence economic risks in many emerging and frontier markets. The expected stabilization of oil and gas prices will alleviate, though not eliminate, some economic pressures for producing countries, while widening financial vulnerabilities for importers, particularly in Asia.

 

Alfonso Satrústegui, Executive Director Surety & Political Risk at Aon Spain It states: “The current changing global environment, characterized by trade protectionism, populist policies, and sanctions, appears likely to have a significant impact on emerging and frontier markets. This makes it more important than ever for companies with global interests to understand and mitigate their exposure to political risk.”

 

Rachel Ziemba, Managing Director Emerging Markets, Roubini Global Economics“As a consequence of political uncertainty in developed economies such as United States y Europe, the major trading partners in Asia and the raw material producers in Sub-Saharan Africa, the Middle East and North Africa They appear more exposed. Given the focus on renegotiations regarding trade, currency, and migration, an increase in currency transfer risk, supply chain disruptions, and government interference in the economy is expected. We observe significant differences in these regions, with the wealthiest countries of GCC (Gulf Cooperation Council) achieving better results than their competitors in the area.”

 

Main findings of the 2017 Report

 

Oil and gas companies were the target of 41% of terrorist attacks against commercial interests in 2016, and this trend continued in 2017. Nigeria and Colombia They occupy the top spots on the list of countries affected by terrorism against the energy sector, with attacks perpetrated by activists in the Niger Delta during the first half of 2016 causing a 36% drop in oil production in Nigeria, Saudi Arabia, Iran, Russia, Venezuela, and the United States They are vulnerable to falling production. As the global oil market gradually contracts, these supply fluctuations can have a greater impact on prices. 

 

Businesses face increased exposure to risks stemming from political violence worldwide. For the second consecutive year, there have been more increases in country risk levels (19) than decreases (11). Global levels of terrorism and political violence are at their highest point since 2013, reflecting not only terrorism but also the risk of coups, civil and interstate conflicts, and rebellions. Currently, 17 countries are at the highest risk level, representing epicenters of instability that pose an international terrorist threat and significantly increase risk exposure for businesses operating in neighboring countries. Africa has three severe risk lines running through it, from the Mediterranean to Atlantic, through the eastern and southern areas of Asia.

 

 

2017 is the first year in the last four in which as many countries have experienced a decline in their political risk for investors as countries that have seen an increase. This suggests a modest improvement in economic resilience after several years of decline.

 

 

Countries open to trade such as Chile, Colombia, Hong Kong, Malaysia, Singapore and Taiwan are exposed to a greater Political risk due to dependence on United States and other business partners. Mexico and the Philippines They are more vulnerable to a reduction in remittances if it is due to trade restrictions. Brazil, India, Indonesia and Nigeria They are more resilient due to a stronger local economy, less dependent on exports.

 

Middle East and North Africa They have the highest concentration of countries with high and severe risk levels worldwide, with heightened political risk and elevated levels of political violence (for example, in Iraq, Syria, Yemen and Libya) also affecting neighboring countries and negatively impacting trade and tourism. The territorial losses suffered by the Islamic State in Iraq and Syria This could lead to a dispersal of the jihadist network, posing a serious threat to dozens of countries in the region and beyond, particularly in Europe y AsiaGCC countries remain more stable in the face of political upheavals, but economic vulnerabilities, including government defaults to the private sector and higher capital costs, are present.