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Terrorism, political risk threats increase: Report

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Companies with domestic and international operations face a rise in terrorism risk as attacks increased by 14% last year and the risk of attacks in the United States increased, according to a report released by Aon P.L.C. on Thursday.

And the wave of populism in the United States and elsewhere is changing the political risk climate, the report said.

While terrorist attacks increased globally, the biggest rate of increase was in Western countries, where terrorism attacks increased by 174%, according to Aon’s 2017 Risk Maps for Political Risk, Terrorism and Political Violence.

The report was produced in conjunction with Roubini Global Economics in New York and The Risk Advisory Group in London.

The West still ranked as the region with the fewest number of attacks, with 96 in 2016, the report stated. The Middle East had the highest number of terrorist attacks with 1,752, followed by South Asia with 658, sub-Saharan Africa with 543, North Africa with 337, Eurasia with 292, Asia-Pacific with 246 and Latin America with 122.

The oil and gas sector was the area of business most targeted by terrorists, the report said. 

“Incidents are preponderant in conflict zones where the hydrocarbons sector is an economic mainstay, particularly Colombia, Nigeria and Iraq. Attacks on the sector have proven an effective way for terrorist groups to weaken economies, undermine the authority of governments and exploit local grievances,” the report said.

Looking forward, the terrorism threat in the United States increased for 2017, according to the report, which rates terrorism threats for countries and regions. “The overall terrorism and political violence risk rating in the U.S. has been raised this year from low to medium. This is due to several areas of increasing risk related to Islamist and far-right terrorism, as well as civil unrest arising from political and racial tensions.”

Political changes in the U.S. also could heighten political risk in emerging markets. In particular, political risk could increase due to “reduction in the gains from trade due to increased protectionism; an increase in financing costs for external debt due to an increase in the U.S. Treasury term premium; currency depreciation and/or capital flight from (emerging markets) as a result of a stronger U.S. dollar; a decrease in remittance flows from foreign nationals working in the U.S. and/or increasing costs in sending them; and greater restrictions on cross-border investment.”

Globally, political violence is likely to increase in 2017, the report said.

“There are wider systemic trends to watch in 2017 … Perhaps the most pressing is the battlefield defeat of Islamic State. When it declared a Caliphate in 2014, thousands of people travelled to join the group in Iraq and Syria. At some point in 2017, hundreds if not thousands of IS fighters are liable to scatter internationally. This carries serious implications for dozens of countries already facing threats from the group and its supporters,” the report said.

Another key trend is the surge in populist nationalism, particularly in Western countries, the report said.
“A weakening of the EU, NATO and U.N. will do little to improve deterrence and stability. Nor will it help responsible powers resolve the often-distant conflicts that destabilize regions, and cause the migrant crises and international terrorism that fuels reactionary populism and stimulates far right violence,” the report said.