Businesses face increased complexity of risks.Multinational corporations
While unveiling the 2005 version of its political risk map at a press conference in the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. , insurance broker Aon Corp.'s trade credit and political risk team noted that their efforts to identify such risks are becoming more complex. "We've updated the map based on our analysis of data from trade credit and political risk insurers, plus our own sources of intelligence," said John Minor, national director of political risk for Aon Trade Credit. Minor said trade credit and political risk underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and consulting are growing rapidly as demand for such expertise swells. "This field tends to have an inverse relationship A inverse or negative relationship is a mathematical relationship in which one variable decreases as another increases. For example, there is an inverse relationship between education and unemployment — that is, as education increases, the rate of unemployment to the standard property/casualty insurance cycle," he said. "As conditions in other property/casualty lines soften, more capital and attention migrates to such risks." To keep pace with the demand, Aon Trade Credit is fine-tuning its trade credit and political risk analysis capability, in an effort to "trickle down Trickle down An economic theory that the support of businesses that allows them to flourish will eventually benefit middle- and lower-income people, in the form of increased economic activity and reduced unemployment. " to more specific risks and their unique nature in individual countries. "For example, General Motors operating in China doesn't face the same risks as Microsoft," said Minor. Minor added that Aon Trade Credit developed a new feature for the map, a supply-chain risk index. "U.S. firms are facing $300 billion in exposure to supply-chain disruptions around the world," he said. Events over the past few years that highlight such risk include the Sept. 11 terrorist catastrophe, the SARS epidemic in Asia, a dock strike in California and civil unrest in Nigeria's oil-rich Niger Delta The Niger Delta, the delta of the Niger River in Nigeria, is a densely populated region sometimes called the Oil Rivers because it was once a major producer of palm oil. region, he said. Michel Leonard, Aon Trade Credit's chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the , said South Korea is a good example of the supply-chain risk problem. "North Korea has emerged as a major concern fur disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. in the region," he said. "Since South Korea is a key market, should there be a war on the peninsula, the disruption in supply chains could be dramatic to global business, such as that for computer chips." The "two big stories" for 2005, in Leonard's view, are the rise of China and India as major markets, and the rising cost of the threat of terrorism to businesses. That rising interest in China and India is driving Aon Trade Credit to develop more sophisticated analyses of their local markets. The group now is working on an analysis of China that will break down the various business risks by region. |
|
||||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion