Lloyd’s Report Warns of Threats from ‘Political Violence’

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 cities.”

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 they face.

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.

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