The political risk climate has probably changed more this year than at any time since the fall of Communism in the late 1980s, and two Forum workshops will provide timely guidance for risk managers on political risks and looking after staff who may get caught up in political unrest or other upheavals.
In the meantime, FERMA is looking to find out how members see the current situation. According to FERMA board member Michel Dennery, for example, country risk has changed completely, and there is a material increase in counter party risk.
He also points out that there is still a great deal of uncertainty over the governments that will eventually replace the old regimes, and companies have to strike a balance between the dangers and the opportunities for development.
At the Forum, ACE Political and Trade Credit Risk Stephen Capon and Wolfgango Piccoli, Director Europe/Eurasia, Eurasia Group, will explain how the insurance market assesses political and economic risks for multinational business with such topical questions as to what extent China remains a reliable source of growth for global business and whether the Eurozone will remain intact.
From the perspective of European clients, Capon says the main effect of the changing political environment has been increased discussion of credit risks.
He draws attention to the need to distinguish between “long term risks and short tactical considerations”. Generational change has yet to take place in some major Middle Eastern countries, he comments, and when it does, there are likely to be knock-on effects in the whole region. “Picking the way through that is one of the biggest long term challenges.”
The risks for business travellers and foreign based staff also require delicate assessment. “It depends on the situation whether it is better to move people or for them to sit tight and keep their heads down,” says ACE Product Head Accident and Health Corporate & Major Risks, Jeff Dowling.
In February 2011, the Danish turnkey cement factory builder, FLSmidth, decided to evacuate their employees from Egypt because of the political turmoil. Mette Bonde, the company’s Travel Security Manager, will describe in her workshop at the Forum why they made this decision, the challenges they faced during the withdrawal of employees and the lessons from the event. She will explain how they benefited from having a travel security system in place before the event.
“Business people are travelling to a much wider range of territories than ever before and so they are more exposed to flash points. It has been a very active year,” comments Dowling.
Dowling acknowledges that there are often opportunities for business in less settled environments, so accident and health insurance policies for multinational businesses have to cover the exposures that company travellers face in these places, such as civil unrest. However, he also points out that political violence can occur in developed as well as emerging markets, considering the Madrid train bomb in 2004 and attacks in London the following year.