May 10, 2007
A new report from Lloyd's and the Economist Intelligence Unit (EIU) has
found that global businesses are becoming increasingly concerned about
risks from political violence. However, too little has been done to
analyze those risks and to "really understand" their impact.
One finding from the report "Under Attack: Global business and the
threat of political violence," revealed that, "concerns regarding
terrorism and political violence are causing businesses to avoid
investing in politically sensitive areas or locating offices in large
The survey canvassed 154 global business leaders and found that over a
third of companies avoid investing in overseas markets for fear of
political violence, while 20 percent have relinquished promising
business opportunities for the same reason.
Lloyd's Chairman Lord Levene indicated that businesses needed to
understand their risks better. "There is a large gap between what
businesses perceive as a threat and the reality," he noted in a bulletin
on the Lloyd's web site (www.lloyds.com). "Many companies are changing
their plans based on perceived threats, which is a problem if their
information is incorrect."
The report is part of Lloyd's 360 Risk Project which aims to generate
debate on how businesses can manage risk. One, somewhat surprising
conclusion, revealed that some 60 percent of the businesses questioned
rely on international media coverage to come to a decision on what risks
Levene pointed out that "media coverage tends to focus on radical
religious terrorism and rarely touches on the emergence of new risks,
such as threats to supply chains, cyber terrorism, home grown terrorism
and the threat of chemical, biological, nuclear and radioactive attack."
Dr. Paul Kielstra, author of the report and contributor to the EIU, also
indicated that businesses place too much emphasis on the wrong
information. "As a result, only 37 percent of business leaders feel
their companies have a good understanding of the political violence
risks they face," he noted.
In addition Lloyd's found that despite the multiple threats "over 37
percent of companies surveyed had either no business continuity plan, or
one that did not adequately take account of political violence risks."
According to Chris Parker, Head of Terrorism at Marsh UK, the insurance
marketplace is responding to the threats. Parker said that around $1.2
billion of capacity is now available from the private market for
stand-alone terrorism coverage, compared with around $100 million before
September 11, 2001. He also said that new products were becoming
available, with $100 million capacity, to cover CBNR risks.
Lloyd's report will be the subject of a debate on Tuesday, May 15. The
panel session, hosted by Lord Levene and chaired by the BBC's John
Simpson, will explore the key issues surrounding terrorism and political
risk and its impact on the business world. Joining them will be business
leaders and risk experts, including Sir Richard Morttram, Permanent
Secretary, Intelligence, Security and Resilience; Sir Richard Dearlove,
former Head of MI6 and Chairman of Ascot Underwriting; and Peter Clarke,
Head of Metropolitan Police's Anti-Terrorism Branch.
(c) 2007 by Wells Publishing, Inc.
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