Aon's fifteenth political risk map reveals some unnerving political and economic risk trends around the world
Aon has launched its now-ubiquitous political risk map for 2008 at a topical time, amid daily headlines full of coups, terrorism and political unrest around the world.
The joint study by Aon and Oxford Analytics has found that there is elevated political and economical risk in 25 of the 50 largest global economies. Multinational companies especially face business risk caused by war, terror attacks and political interference.
Oil-rich countries such as Iran and Nigeria were highlighted as areas of particular concern due to the concentrations of many forms of disruptive risk such as civil unrest.
The revelation is worrying on many levels as the global markets struggle to adapt to rising oil prices (which broke the $100 barrel mark in early January) and the race to find viable alternative fuels.
Miles Johnstone, director of political risk at Aon’s Crisis Management, said that the rising price of oil also brought with it the increased risk of nationalism.
“The rise in global oil prices and associated nationalism risks is indicative of the general increase in resource nationalism which has been fuelled by rising commodity prices across the board,” he added.
He used the small African nation of Guinea Bissau as an example of one country which had been downgraded due to a failure of its main cash crop, cashew nuts.
“The rise in global oil prices and associated nationalism risks is indicative of the general increase in resource nationalism which has been fuelled by rising commodity prices across the board
Miles Johnstone, director of political risk at Aon's Crisis Management
“There is now a greater polarity than ever between the high and low risk countries,” Johnstone said.
For the first time this year, the report included a global credit crunch vulnerability index which measured emerging markets’ exposure to international financial turmoil.
Slowed global economic growth – particularly in the United States, where falling home values and rising unemployment are contributing to fears the world’s largest economy will sink into recession this year – will directly impact companies’ credit quality, increasing the risk of non-payment of receivables, the report said.
“As well as updating the economic risk icons for the US, we have also added them to the UK, Spain and Ireland in light of the global financial situation,” said Johnstone.
He also said that those countries that had boomed economically in recent years would be the most at risk from the credit crunch.
This included Brazil, Russia, India and China, a group of countries that Johnstone labelled the “engine room of the world economy”.