Implications of Arab Spring and political transitions raise concerns for businesses around the world: Aon Political Risk Map
Interest in political risk insurance increasing as chief stakeholders take notice
CHICAGO (February 8, 2012) – While clarity has begun to emerge in some of the countries affected by the Arab Spring, the resulting tension has spurred or intensified protests in dozens of countries, both within the region and elsewhere. According to Aon's 2012 Political Risk Map released today, this remains a concern for businesses operating in those nations.
Aon Risk Solutions, the global risk management business of Aon Corporation (NYSE: AON), measured political risk in 167 countries and territories to assess the risk level of exchange transfer, sovereign non-payment, political interference, supply chain disruption, legal and regulatory, and political violence.
"These uprisings and protests remain a key concern in 2012 and we see this reflected in rating downgrades of several countries," said Roger Schwartz, senior vice president of political risk for Aon Risk Solutions’ Crisis Management Practice. "This is forcing CEOs and CFOs of businesses with overseas operations in emerging markets to revisit risk management and risk mitigation measures."
In addition, the outcome of elections in the U.S., France, Russia and China may contribute to greater global uncertainty. The eurozone debt crisis remains a significant risk, and extends to those countries economically or otherwise dependent on the region.
Aon’s map provides an indication of overall levels and types of political risk, which relates to the actions or inactions of foreign governments, including third-party countries which may deprive a business of its assets, prevent or restrict the performance of a contract and affect repayment of loans to financing banks.
Political risk can exist for businesses that invest, operate, trade or lend in emerging markets.
About the 2012 Aon Political Risk Map
Aon measured political risk in 167 countries and territories to assess the risk level of exchange transfer, sovereign non-payment, political interference, supply chain disruption, legal and regulatory, and political violence. Each country is rated as Low, Medium-Low, Medium, Medium-High, High or Very High. European Union and Organisation for Economic Cooperation and Development member countries are not rated in the 2012 map.
Country ratings reflect a combination of analysis by Aon Risk Solutions, Oxford Analytica, a global analysis and advisory firm, and the opinions of 26 Lloyd’s syndicates and corporate insurers actively writing political risk insurance.
Upgrades (where the overall country or territory risk is rated lower than the previous year)
Three upgrades: Moldova, Ukraine, Uruguay
Downgrades (where the overall country or territory risk is rated higher than the previous year)21 downgrades: Azerbaijan, Bahrain, Belarus, Colombia, Croatia, Egypt, Falkland Islands, Gabon, Guatemala, Guinea Bissau, Libya, Morocco, Oman, Pakistan, Swaziland, Syria, Thailand, Tunisia, Uganda, Vietnam, Western Sahara
Each country on the map is rated according to the different types of risks it faces, and these risks are indicated by the following icons:
The risk of being unable to make hard currency payments as a result of the imposition of local currency controls. 71 countries have this risk icon, including Bolivia, Kenya, Swaziland, Pakistan and Turkmenistan.
Legal and Regulatory:
The risk of financial or reputational loss as a result of difficulties in complying with a host country’s laws, regulations or codes. 104 countries have this risk icon, making it the most common risk on the map. Countries with this risk icon include Belarus, Kazakhstan, Somalia, Thailand and Yemen.
The risk of host government intervention in the economy or other policy areas that negatively affect overseas business interests; e.g., nationalization and expropriation. 92 countries and territories have this risk icon, including five new entrants for 2012: Egypt, Gambia, Libya, Peru and Western Sahara.
The risk of strikes, riots, civil commotions, sabotage, terrorism, malicious damage, war, civil war, rebellion, revolution, insurrection, hostile act by a belligerent power, mutiny or coup d'etat. 81 countries have this risk icon, including Bahrain, Libya, Senegal, Sierra Leone and Turkmenistan.
The risk of failure of a foreign government or government entity to honor its obligations in connection with loans or other financial commitments. 85 countries have this risk icon in 2012, including Croatia, Dominican Republic, Egypt, Nigeria and Vietnam.
Supply Chain Disruption:
The risk of disruption to the flow of goods and/or services into or out of a country as a result of political, social, economic or environmental instability. This is the least common risk icon with 61 countries, including Guinea Conakry, Papua New Guinea, Syria, Tuvalu and Vanuatu.
Aon Corporation (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit http://www.aon.com for more information on Aon and http://www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.
This communication states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations or forecasts of future events. They use words such as "anticipate," "believe," "estimate," "expect," "forecast," "project," "intend," "plan," "potential," and other similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. For example, we may use forward-looking statements when addressing topics such as our plans, objectives, expectations and intentions with respect to future operations.
Forward-looking statements may also include statements regarding market and industry conditions, including competitive and pricing trends; changes in our business strategies and methods of generating revenue; the development and performance of our services and products; and future actions by regulators. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Further information concerning Aon and its business, including factors that potentially could materially affect Aon’s financial results, is contained in Aon’s and, historically, Hewitt’s filings with the SEC. See Aon’s Annual Report on Form 10-K and Annual Report to Stockholders for the fiscal year ended December 31, 2010 and Quarterly Reports on Form 10-Q for the subsequent fiscal quarters and other public filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our businesses. Aon does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in their respective expectations, except as required by law.
Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.
Om Aon Sweden
Aon Sweden är Sveriges ledande leverantör av risk managementtjänster, försäkrings- och återförsäkringsförmedling, human resources-lösningar och outsourcing. Aon Sweden har ett starkt lokalt engagemang för sina kunder och ett globalt utbud av expertis och resurser. Verksamheten etablerades 1992 och idag har Aon Sweden cirka 250 anställda i Stockholm, Göteborg och Malmö. Gå in på www.aon.com/sweden/ för mer information.