WASHINGTON--The possibility of property expropriation is increasing in oil and other commodity exporting nations as prices have risen, according to Aon brokerage, which released its map of global political risk yesterday.

Bryan Squibb, managing director of Aon Trade Credit Global, warned at a press conference: "Risk is one of the fundamental drivers of the global economy and misunderstanding it can be fatal to a business."

Mr. Squibb said he has "noted a significant increase in the number of CEOs, CFOs and chief risk officers who are seeking a greater understanding of how their businesses are at risk in an increasingly complex global environment versus their primary risk concerns ten years ago."

The Aon Trade Credit Global map shows political and economic risks that insurers face in 209 countries and territories across the globe. Mr. Squibb commented that the map represents "a moment in time" and depicts "the potential hazards as opposed to the expected."

Most companies, Mr. Squibb explained, "are sophisticated enough to know the world is a dangerous place." The risks presented by operating in a particular country are the "price of opportunity," he added, and companies should gauge those risks and their potential costs prior to determining if those operations would be better served by moving elsewhere.

"What companies have to be more sophisticated about is determining the actual conditions that could affect their business and what the impact could be on their bottom line," he said.

Virtually every country across the globe, including 25 of the top 50 economies, present some risk, according to the Aon analysis. Even low-risk countries, such as the United States or the United Kingdom, present risk relating to potential economic development or terrorism, and countries such as China or Russia, which are listed as medium risk, present the potential for regulatory issues or political interference.

Among the most difficult countries in terms of risk, according to Aon, are Pakistan and Iran, both of which were listed as vulnerable to all nine of the risks included in the analysis such as war, terrorism, supply-chain vulnerability and the potential for local political interference.

Other countries throughout the Middle East, as well as Nigeria and Venezuela, were also considered high risk for companies.

Sam Wilkin, senior consultant at Oxford Analytica, who took part in the analysis, noted that many of these countries "have something in common" in that they are commodity-exporting nations, and even more so in that many high-risk nations are oil exporters. As the prices for commodities have increased in recent years, Mr. Wilkin said an increase in "economic nationalism" has also taken place in which the risk of asset expropriation or forced contract renegotiation has been heightened.

Another factor included in the analysis is what Aon refers to as the "credit crunch," in which slow economic growth, particularly in the United States, increases the risk of nonpayment of receivables for companies.

Among those most likely to be impacted, according to Aon, are those countries that are newer participants in the global economy. Specifically, Aon noted that many Eastern European countries, such as Latvia, Lithuania, Estonia and Croatia, are among those most likely to be impacted by the credit crunch.

Special Reports /

Commodity Prices A Factor In Global Risk, Says Aon

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