AON: Terrorism and political activism, the new challenges for European businesses

16 April 2019 — Cosmin CONCEATU

Populism, protectionism and the changing face of terrorism are all phenomena that are currently shown more often in Europe and around the world. Aon, a leading global professional services firm, specialized in risk, retirement and health consulting, published a detailed analysis over this topic.

Terrorism and political violence

  • 16% of terrorist attacks in 2018 targeted or directly impacted business.
  • North America and Europe saw reduced levels of terrorist attacks motivated by Islamist extremism, but the attacks motivated by national extremist beliefs increased. Terrorism fueled by right-wing beliefs in Europe and North America has doubled since 2016. Germany experienced a spike in far-right attacks and plots - with 23 incidents between 2016-2018, doubling previous numbers.
  • Far-right terrorist attacks and plots in Europe and North America have almost doubled in frequency since 2016. The Risk Advisory Group and Aon recorded 27 in 2018 (compared with 14 in 2016). This trend has remained evident in 2019, with the attack by a far-right extremist on two mosques in New Zealand that killed 50 people.
  • Islamic State (IS) was less capable in the past year to mount any attacks in the West, but the recent wars from Iraq and Syria, where IS lost territories, made IS shift its focus on more fragile countries with poor security - Afghanistan, Nigeria, Philippines. In 2018, the attacks number in these 3 countries almost doubled, while in Europe, North America and Australia the number of attacks dropped from 26 (in 2017) to 11 attacks (in 2018).
  • The frequency of jihadist attacks across Southeast Asia rose by around 30% last year.
  • The risk of civil commotion is increasing in China, strikes and labor protests have occurred with greater frequency over the last year.
  • 70% of countries in Sub-Saharan Africa have a peril for strikes, riots and civil commotion in the 2019 issue of the Terrorism and Political Violence Risk Map. 25% have a peril for terrorism and sabotage.
  • The sports and entertainment industry is very sensitive to terrorism risk. A major attack at a sporting event or a concert can have a significant impact on consumer behaviour, so the industry must take adequate measures to assess, mitigate and transfer the risk of losses stemming from terrorism.

Political risk

  • Populism is no longer a fringe issue. Its impact has been disruptive to the economic system, majorly affecting trade and fiscal gaps.
  • Populist policies are characterized by expansive fiscal policy and opposition to free trade and globalization. The anti-immigrant stance of populist parties certainly puts them on the far right of a traditional political spectrum.
  • Populism, aided by subtle and divisive use of multi-media platforms, has gained ground and continues to spread. Brexit, Italian election results, Presidents in the US, Mexico and Brazil are all examples of the rise of populism. Although populism has been kept away from power in recent European elections (apart from Italy), its support is clearly on the rise.
  • European populism has an anti-EU slant. Populism has already complicated government formation in many countries (e.g. Netherlands, Germany, Sweden) and has also polarized political thinking in the UK (Brexit is perhaps the clearest manifestation).
  • Spain has remained a bright spot in the Eurozone and has maintained momentum amid increasingly uncertainty. Economic output has been propelled by a surge in exports, strong domestic demand and government spending.
  • Italy has underperformed since the global financial crisis as the economy has failed to recover to its pre-crisis GDP level. Italy's economy slipped into recession at the end of last year and is likely to continue contracting in 2019. Moreover, a lack of reforms amid a persistently splintered political backdrop, has stagnated the economy.

Paulina ARGUDIN, Director, Country Risk Model, Continuum Economics, mentioned:
"A rise in populism, amid a general dissatisfaction with the traditional political class, has increased the risk of disruptive policies in many countries, weighing negatively in their economic prospects. Populist policies can exacerbate political risk by increasing fiscal imbalances and inflation as well as rising the odds of state intervention."

Henry WILKINSON, Head of Intelligence & Analysis at the Risk Advisory Group, added:
"Reactionary populism in the political mainstream in several countries has given extremist fringes a sense of opportunity upon which to mobilize violent protests and intimidation around divisive political themes. Far right terrorism remains a largely disorganized but growing threat. Businesses in Europe cannot be complacent about violent risks in traditionally stable markets. A comprehensive capability to monitor, assess and manage violent risks, is as essential as a violent risk transfer strategy."

Sarah TAYLOR, Head of Political Risk and Structured Credit at Aon, said:
"Businesses operating in territories where political risk is elevated should be considering insurance that covers against government decisions that can lead to contract cancellation, when measures are introduced to create barriers to trade, and against government action that curtails business operations and/or investments."

Full AON report can be found here: RISK MAPS 2019.

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