European austerity drives political risks

The risk of terrorism and political violence will continue to increase throughout 2012 due to the continued effects of the global economic crisis and dramatic political change.

The release of Aon’s 2012 Terrorism & Political Violence Map this week revealed that it had downgraded 37 countries in total, largely due to civil unrest. Staggeringly, 43% of the downgrades were attributed to austerity measures being implemented throughout Europe, with the UK, France, Germany, Italy, Portugal and Spain all downgraded from low to medium risk.

Dr. David Claridge, Managing Director of Risk Advisory said that it “was the first time since the Map’s inception [that] we have recorded significant negative ratings in Western Europe”, and that this was reflective of the last past and ongoing civil disorder. He added: “With further austerity measures still to be imposed and the Eurozone crisis only in remission, economic and social degradation are likely to be important drivers of future unrest.”

The after-effects of the Arab Spring continue to ripple across the Middle East and beyond, and authoritarian governments in Africa and Asia have taken measures to protect themselves from similar challenges to those faced by the now ousted Egyptian and Libyan governments.

The death of Osama Bin Laden last year signified the decline of a truly radical Islamist terrorism capability, however, the risk of al-Qaeda - inspired localised groups and/or ‘lone wolfs’ remains significant, particularly in Africa.

Aon’s Map acts as a gauge for the intensity of the threat of political violence to international business in each country, and uses three icons to indicate the following forms of political violence:

• Terrorism and sabotage
• Strikes, riots, civil commotion and malicious damage to property
• Political insurrection, revolution, rebellion, mutiny, coup d’etat, war and civil war
• Seven countries were upgraded on the Risk Map, including Australia, Cote d’Ivoire, Egypt, Macau, Macedonia and the Netherlands.

Summing up the Map, Neil Henderson, Head of Terrorism in Aon Risk Solutions’ Crisis Management Practice commented “As can be seen from the number of downgrades, risks continue to grow. Companies that operate internationally have to keep up to date with potential risks around the world to enable them to protect their employees, physical assets and ultimately, their bottom line. Businesses need to identify the threats they face and implement a comprehensive risk management programme to protect themselves. As the insurance market for political violence is very mature and can cope with complex international risks, it should be considered as part of a business’ sound risk management programme.”