InterestAlert.com: Aon Experts: Nationalism, Risk Complexity Among Key Challenges to Global Business in 2007

EXTRACT: “The world’s multinational energy companies are feeling the effects of nationalism, “said Bryan Squibb, Aon U.S. Trade Credit national managing director. “Oil – producing countries are seizing local resources that were once owned by or shared with international oil companies.”

“This could be a blanket country action, such as Bolivia’s outright nationalization of the oil & gas industry in May 2006, or more targeted action, possibly through arbitrarily imposed regulations and interference against individual projects, such as Russia’s recent moves against Sakhalin II or BP’s TNK-BP.

THE ARTICLE

Aon Trade Credit Unveils 2007 Political Risk Map

CHICAGO, Jan. 18 /PRNewswire-FirstCall/ — Risk complexity, nationalism and arbitrary regulation have emerged as significant threats to multinational corporations’ balance sheets, according to the latest global analysis by Aon political risk experts.

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Each year, Aon’s political risk and trade credit experts analyze the political and economic risk climate in more than 200 countries. Their findings are illustrated in the annual update of Aon’s Political and Economic Risk Map, now in its 14th year. The latest edition, published today, shows that of the 214 countries surveyed in 2006, 15 countries pose less of a risk in 2007 compared to 2006, contributing to a decrease in the overall level of global political risk for the first time in three years.

Despite this, 2006 produced its fair share of political risk events. “The world’s multinational energy companies are feeling the effects of nationalism, “said Bryan Squibb, Aon U.S. Trade Credit national managing director. “Oil – producing countries are seizing local resources that were once owned by or shared with international oil companies.”

“This could be a blanket country action, such as Bolivia’s outright nationalization of the oil & gas industry in May 2006, or more targeted action, possibly through arbitrarily imposed regulations and interference against individual projects, such as Russia’s recent moves against Sakhalin II or BP’s TNK-BP. Such events, along with other geopolitical problems in other regions of the world, will likely keep oil prices high for at least the next year,” Squibb said.

For example, Squibb said, in January 2006, Russia turned off the gas supply to Ukraine unless it agreed to increase the prices paid for Russian gas. Ukraine will need to agree to pay even higher prices during 2007 to avoid that happening again; Belarus has just agreed to pay Russia higher prices to ward off the same threat.

Greater reliance on overseas sourced goods, with increasingly tighter ‘just-in-time’ production demands, means that companies’ global supply chains are under threat from political and non-political trade disruption risks such as embargoes or even bird flu.

“The magnitude and complexity of risk is increasing for companies around the world,” said Squibb. “In addition the same companies are facing increased scrutiny both internally and externally. There are severe corporate governance and reputational risks.

“Companies now need to carry out far more detailed and diverse analysis of the risks they face in foreign territories and these issues need to be constantly monitored as well, whether they are macro or micro in nature.”

“The types of risks shown on Aon’s map have serious consequences for business, which accounts for the map’s continued popularity year after year,” according to Oxford Analytica Senior Consultant Sam Wilkin. “This is doubly true in the era of Sarbanes-Oxley, and now that companies are increasingly held to account for labor practices at even distant points of their global supply chains.” Oxford Analytica collaborates with Aon Trade Credit on the annual political risk analysis for the map.

Aon’s Political & Economic Risk Map shows perceived general political risk in 214 countries and addresses specific risks such as: strike, riot, terrorism and war risks; sovereign default risk; economic & credit risk; supply chain vulnerability; legal & regulatory risk and political interference; exchange transfer problems.

Aon has been providing political risk and trade credit insurance and consultancy services since 1912 and now has over 400 specialists in 60 offices around the world.

About Aon

Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. Aon has 45,000 employees in 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

About Oxford Analytica

Oxford Analytica is an international, independent consulting firm drawing on a network of over 1,000 senior faculty members at Oxford and other major universities and research institutions around the world. Founded in 1975 by Dr. David R. Young, Oxford Analytica has built an international reputation for seasoned judgment on the geopolitical implications of national and international developments, and counts 50 world governments, as well as the United Nations, World Bank, and International Monetary Fund, amongst its clients.

    For more information contact:
     Al Orendorff
     312.381.3153
     [email protected]
     www.aon.com/newsroom

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