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The Actuary The magazine of the Institute & Faculty of Actuaries

Risk management urged to consider rising global terrorism and political violence

Businesses must develop strategies to navigate an increasingly volatile operating environment as a result of rising populist nationalism and the growing threat of terrorist attacks, according to Aon’s 2017 Risk Map.

Risk of terrorism is on the rise ©iStock
Risk of terrorism is on the rise ©iStock

It reveals that there were 4,151 terrorists attacks worldwide last year, a 14% increase from the 3,633 recorded in 2015, with oil and gas companies the target of 41% of attacks on commercial interests.

Western countries experienced a 174% rise, up from 35 in 2015 to 96 last year, although this accounts for less than 3% of terrorist violence globally, with countries in North Africa and the Middle East the most at risk.

“The shifting dynamics around terrorism and political violence, reflected in the global events seen in 2016, are presenting an increasing challenge for companies,” Aon crisis management director, Scott Bolton, said.

“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 organisation and its people, then we are better able to apply 'best fit', consistent approaches to manage risk."

Aon’s overall terrorism and political violence ratings are the highest they have been since 2013, which include the possibilities of coups, civil and interstate conflicts, and rebellions.

The research shows that there are few indications of an overall improvement in violent risks this year, with impacts ranging from loss of life to business interruption and disruption in the supply chain.

There is also the risk that this could evolve at the geopolitical level, leading to increased defence spending, more authoritarian forms of government and a weakening consensus between states.

“In 2017, businesses must develop strategies to face more business-threatening risks from the geopolitical realm,” Risk Advisory, head of intelligence and analysis, Henry Wilkinson, said. “Authoritarian nationalism is on the rise, and with it, the risk of interstate crises and conflicts, coups and rebellions.”

It is also thought that populism, and protectionist policies in developed economies like the US, could leave emerging ones like Chile, Colombia and Hong Kong vulnerable due to their dependence on trade with them.

However, it is predicted that countries like Brazil, India, Indonesia and Nigeria would be more resilient to this due to their large domestic economies, which are less reliant on exports.

Aon executive director, Sarah Taylor, said: "The changing global landscape, driven by trade protectionism, populist policies and sanctions, is likely to have a significant impact on emerging and frontier markets. 

“This makes it more important than ever for global businesses to understand and mitigate their exposures to political risk."

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