Dangerous new front opens for business

Businesses across Europe will no doubt be hoping that 2013 is less turbulent than the previous 12 months.

Last year, the growing crisis in the eurozone engulfed both Spain and Italy and, for a time, its struggling neighbours threatened to drag even the previously stable France into the fray.

It now appears. however, that perhaps the most damaging threat to the single currency could be behind us.

But that is not to say the economic problems are over.

European Commission president Jose Manuel Barroso may well have been premature in his bold pronouncement this month that the threat to the survival of the euro had been overcome.

How can it be when so many of the eurozone countries are still drowning in debt, unemployment remains on the increase and economic contraction continues to hinder business growth?

World Economic Forum founder Klaus Schwab certainly takes a different – and perhaps more realistic – view to Barroso.  Earlier this week he warned that the risk of a collapse in the global economy remained.

“The problems and the risks have not gone away,” he said on the eve of this year’s Forum event in Davos, Switzerland. “The world economy may still confront a collapse if very negative constellations occur.”

That said, however, Barroso perhaps has a point in highlighting the crucial role played by the European Central Bank and its promise last autumn to buy unlimited amounts of state debts.

After numerous false dawns, this one action appears to have brought stability where once there was only turbulence and a degree of certainly to replace the doubt which has so troubled both decision-makers and the markets.

Perhaps, therefore, we can look ahead at the start of 2013 with more optimism than for many years – although it is important to retain a sense of practicality also in terms of understanding that the worst may well be over, but it is a long road ahead to full recovery.

Most large and medium-sized European companies are highly sophisticated and have a considerable level of maturity in both risk management and insurance purchasing.

These risk managers and insurance buyers are, however, being tested as never before.

Even without the current problems in the eurozone, opportunities for growth for many European businesses often lie outside the continent itself.

Complex compliance and supply chain issues present constant and ever-changing challenges for those risk managers.

Other even more serious problems must also be considered.

Last week’s decision by French president Francois Hollande to intervene militarily in Mali and also the subsequent terrorist attack on the gas plant in Algeria which specifically targeted Western nationals, revealed new dangers for businesses and their employees.

The Middle East has long since been a potentially perilous region in which to do business, but those firms that trade there do so with a considerable degree of knowledge and understanding of the possible risks they might be taking.

Recent events in North Africa show that such dangers are shifting closer towards Europe. A new front in the war against terrorism has opened up and threatens the security of countries which in recent years have been relatively safe.

The fallout from the so-called Arab Spring has created a power vacuum in parts of North Africa and this has been seized upon by terror groups keen to wage war on the West.

In light of the appalling events in Algeria and the increasing threat to life, businesses which continue to invest in these countries now face tough choices.

Keeping workers safe is of course paramount and it may be that this over-riding concern prevents expansion for companies which might otherwise have found these emerging markets attractive.

Where business does continue, the importance and understanding of local knowledge takes on ever greater significance and is one of the key ways in which risk managers must get the information they need to make the right decisions.

The danger to European business may be less than it was last year in terms of the eurozone problem - but other troubles are surfacing which could present even greater challenges to risk managers.