SYS-CON MEDIA Authors: Noel Wurst, Liz McMillan, Sean Houghton, Glenn Rossman, Ignacio M. Llorente

News Feed Item

BRICS countries facing increasing political risk says Aon

- Volatility in Ukraine impacting on other former Soviet states

LONDON, April 10, 2014 /PRNewswire/ -- Aon Risk Solutions, the global risk management business of Aon plc (NYSE: AON), today unveiled its 2014 Political Risk Map which identifies an increased risk rating for all five emerging market BRICS countries.  As a result, countries representing a large share of global output experienced a broad-based increase in political risk including political violence, government interference and sovereign non-payment risk.

  • Brazil's rating was downgraded; political risks have been increasing from moderate levels as economic weakness has increased the role of the government in the economy. This is of particular concern given this year's World Cup and the 2016 Olympics.
  • Russia's rating was downgraded largely due to recent developments with the Ukraine and the annexation of Crimea. Political strains and focus on geopolitical issues have exacerbated an already weak operating environment for business and exchange transfer risks have increased following the risk of new capital controls. Russia's economy continues to be dominated by the government, so economic policy deadlock has brought growth to a standstill and with it an increase in the risk of political violence.
  • India's rating was downgraded with legal and regulatory risks elevated by ongoing corruption and moderately high levels of political interference. Territorial disputes, terrorism, and regional and ethnic conflicts also contribute to elevated risks of political violence.
  • China's rating was downgraded to moderately high. This deterioration in political risk, including an increase in political violence, has occurred at a time of slowing economic growth, which suggests that the economic policy deadlock and economic sluggishness are mutually reinforcing.
  • South Africa's rating was downgraded; despite having strong political institutions, South Africa is struggling from recurrent strikes, which have become the major means of wage setting, and which weaken the outlook for business and raise financing costs.
http://www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 37,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions. " border="0" alt="Aon Corporation (http://www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 37,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions. " align="middle" src="http://photos.prnewswire.com/prnvar/20100719/AQ37264LOGO"/>

Matthew Shires, Head of Political Risk, Aon Risk Solutions, said "By using the latest data and analysis capabilities, Aon's interactive online map provides clients with unprecedented clarity when assessing their emerging markets political risks.  By way of an example, the volatile situation in the Ukraine began to be highlighted in our quarterly updates in mid 2013.  These quarterly updates assist our clients' in their strategic and financial decision-making.  The degree of risk and exposures vary considerably in the emerging markets and this highlights the need for institutions to be able to generate their own high level overview of political risk and how it affects them; for this they need access to a sophisticated risk tool such as the online map."

Leading data, analytics and insight from a leading team
The map measures political risk in 163 countries and territories, in order to help companies assess and analyse their exposure to exchange transfer, legal and regulatory risk, political interference, political violence, sovereign non-payment and supply chain disruption.  Aon's long-standing strength in Political Risk management is complemented by partnering with Roubini Global Economics (RGE), an independent, global research firm founded in 2004 by renowned economist Nouriel Roubini, in order to take advantage of RGE's unique methodology.

Paul Domjan, Managing Director, Roubini Country Insights, said "Roubini Global Economics is proud to continue to partner with Aon to deliver this insightful approach to mapping political risk and political violence for its clients.  This year the political risks in emerging markets have risen, particularly in the some of the largest economies.  Our quarterly scores give an updated picture of developing risks, helping investors respond quickly to deteriorating balance sheets and better hedge their exposure.  Once again, the map demonstrates the power of combining RGE's country analysis and benchmarking with Aon's expertise in country risk."

Map overview:

Deterioration in Commonwealth of Independent States:
In early 2013, we identified some improvements in the Caucasus, Armenia and Azerbaijan, which have continued.  The rest of the region has weakened.  Russia's rating was downgraded largely due to recent developments with the Ukraine.  This volatility is also affecting other former soviet states including Armenia, Belarus, Georgia and Moldova.

Ukraine's position deteriorated throughout 2013, which culminated in a downgrade to High risk in Q3 from Medium High.  The annexation of Crimea by Russia, and government collapse was already consistent with a country with a high political risk, but the implications of these developments warranted a further downgrade in political risk – Ukraine is now a Very High risk country.  Exchange transfer risks, which are already very high will be further increased by restrictions in the financial system.  Further, the willingness and ability of the country to settle its debts may be affected.  Meanwhile the weakening of global demand for base metals has hit government revenues and weakened its ability to stimulate the economy.  In addition to uncertainty regarding the status of Crimea, Russia's desire for federalization in Ukraine, will provide flashpoints.  RGE's baseline assumes that there will be some de-escalation of tensions short of war, but Russia will be likely to continue to de-stabilize eastern Ukraine.  The upcoming presidential election will present a source of economic and political uncertainty.

Divergence Widening within Middle East and North and West Africa:  Developments in 2013 have reinforced the relative strength of the richer oil exporting MENA countries of the Gulf Cooperation Council (GCC).  Compare this to their North African peers, all of whom have fewer financial resources with which to manage any shocks, they all continue to have higher risk scores across all elements of political risk tracked by Aon.  The three countries upgraded in 2013's risk map (Bahrain, Oman and UAE), maintained their more resilient and lower risk outlook, while Jordan, where Syrian refugees have exacerbated domestic shocks, was downgraded.

Sub-Saharan Africa Divergence: There are some improvements in Sub-Saharan Africa, notably in Ghana and Uganda which offset deterioration in South Africa and Swaziland, which were both downgraded.  Although Ghana has fiscal overspending and rising inflation, which is weakening its macroeconomic stability, increases in revenues and investment reinforced its already strong political institutions.  Uganda continues to suffer from an overly centralized government and significant human rights issues, the stabilization of donor finance improved its ability and willingness to pay debts and reduced political interference.

By contrast political conditions deteriorated, particularly in Swaziland, which is being supported by its neighbours financially, and suffered a broad-based increase in political risk and economic strain which added to expropriation risk.  South Africa, despite having strong political institutions is struggling from recurrent strikes, which have become the major means of wage setting, and which weaken the outlook for business.

Key flashpoint risks and trends to watch for 2014
The combination of Aon's focus on data and analytics, and RGE's unique Country Insights methodology, has highlighted the following key points to watch in 2014:

  • Exchange Transfer: Economic recovery in developed markets and the beginning of interest rate normalization has the effect of drawing capital back from emerging markets. This adds pressure to countries with weak external balances. The increase in political risk in some of the larger emerging market countries has weakened long-term capital (FDI) increasing the risk of measures being introduced to retain capital that will impede transfers of funds/repatriation of assets.
  • Sovereign Non-Payment: As fiscal balances weaken and default risks rise, in countries like Ukraine, along with foreign exchange pressure, corporations will see a change in certain sovereigns' willingness and ability to pay. Aon's Political Risk Map tracks both and highlights this weakness early.
  • The heavy global election cycle in 2014 could exacerbate political violence, government intervention and policy implementation risk.

2014 upgrades and downgrades in Country Ratings:
Upgrades (where the overall country or territory risk is rated lower than the previous year)
6 upgrades (2013: 13 upgrades): Ghana, Haiti, Laos, Philippines, Suriname, Uganda

Downgrades (where the overall country or territory risk is rated higher than the previous year)
16 downgrades (2013: 12 downgrades): Brazil, China, Eritrea, India, Jordan, Kiribati, Micronesia, Moldova, Russia, Samoa, South Africa, Swaziland, Tonga, Tuvalu, Ukraine and Vanuatu.

Trends:
This year's 22 Country Rating changes compared to 25 in 2013.  RGE's Country Insight scores capture a series of small changes on a quarterly basis, which can give an early warning of changes.  Any changes in grade are delivered quarterly and allow the Political Risk Map to highlight deterioration in countries, such as with the Ukraine several quarters in advance.

Risk Icons
Each country on the map is rated according to the different types of risks it faces.  These risks are indicated by the individual icons, with the first six icons driving the overall country rating, and the three new icons included for additional information.

Brief Descriptions of Each Risk Icon
Country ratings on the map derive from six core Risk Icons, which represent insurable risk and these are;

Exchange Transfer: The risk of being unable to make hard currency payments as a result of the imposition of local currency controls.  This risk looks at various economic factors, including measures of capital account restrictions, the country's de-facto exchange rate regime and foreign exchange reserves.  This Risk Icon has been added to 25 countries and territories, including Namibia, Nepal, and South Africa.  This Risk Icon has been removed from 5 countries including Bangladesh, Mongolia, and Uganda.  107 countries have this Icon.

Sovereign Non-Payment: The risk of failure of a foreign government or government entity to honour its obligations in connection with loans or other financial commitments.  This risk looks at measures of both ability and willingness to pay, including fiscal policy, political risk and rule of law.  This Risk Icon has been added to 22 countries and territories including Gabon, Moldova and South Africa.  This Risk Icon has been removed from 4 countries, including Belarus, Malawi and Montenegro.  108 countries have this Icon.

Political Interference: The risk of host government intervention in the economy or other policy areas that adversely affect overseas business interests; e.g., nationalization and expropriation.  This risk is composed of various measures of social, institutional and regulatory risks.  This Risk Icon has been added to 6 countries and territories including India, Mozambique, and Cape Verde.  This Risk Icon has been removed from 2 countries: Bangladesh and Benin.  85 countries have this Icon.

Supply Chain Disruption:  The risk of disruption to the flow of goods and/or services into or out of a country as a result of political, social, economic or environmental instability.  From 2013, this includes an assessment of domestic supply chain risk.  This Risk Icon has been added to 20 countries and territories, including Bahrain, Macedonia, and Rwanda.  This Risk Icon has been removed from 4 countries including Jamaica, Montenegro, and Saudi Arabia.  116 countries have this Icon.

Legal and Regulatory:  The risk of financial or reputational loss as a result of difficulties in complying with a host country's laws, regulations or codes.  This risk comprises measures of government effectiveness, rule of law, wider property rights and regulatory quality.  This Risk Icon has been added to 17 countries and territories including Colombia, Morocco, and Peru.  This Risk Icon has been removed from 2 countries:  Thailand and Zambia.  110 countries have this Icon.

Political Violence: The risk of strikes, riots, civil commotions, sabotage, terrorism, malicious damage, war, civil war, rebellion, revolution, insurrection, a hostile act by a belligerent power, mutiny or a coup d'etat.  Political violence is quantified using measures of political stability, peacefulness and specific acts of violence.  This Risk Icon has been added to 19 countries and territories, including Belize, Indonesia, and Ukraine.  This Risk Icon has been removed from 5 countries, including Armenia, Serbia, and Timor Leste.  104 countries have this Icon.

Risks to Doing Business: The regulatory obstacles to setting up and operating business in the country, such as excessive procedures, the time and cost of registering a new business, dealing with building permits, trading across borders and getting bank credit with sound business plans.  This Risk Icon has been added to 8 countries and territories, including Botswana, Pakistan, and Senegal.  This Risk Icon has been removed from 8 countries, including El Salvador, Seychelles, and Zambia.  97 countries have this Icon.

Banking Sector Vulnerability: The risk of a country's domestic banking sector going into crisis or it not being able to support economic growth with adequate credit.  This risk comprises measures of the capitalization and strength of the banking sector, and macro-financial linkages such as total indebtedness, trade performance and labor market rigidity.  This Risk Icon has been added to 13 countries and territories, including Botswana, Pakistan, and Senegal.  This Risk Icon has been removed from 13 countries, including Barbados, Dominican Republic, and Ghana.  108 countries have this Icon.

Risks to Fiscal Stimulus: The risk of the government not being able to stimulate the economy due to lack of fiscal credibility, declining reserves, high debt burden or government inefficiency.  This Risk Icon has been added to 12 countries and territories, including Afghanistan, Iran, and Panama.  This Risk Icon has been removed from 11 countries, including Burkina Faso, Iraq, and Vietnam.  97 countries have this Icon.

The map can be accessed at aon.com/2014politicalriskmap

Notes to Editors:

About the 2014 Aon Political Risk Map
Aon measures political risk in 163 countries and territories to assess the risks associated with exchange transfer, sovereign non-payment, political interference, supply chain disruption, legal and regulatory regimes, political violence, ease of doing business, banking sector vulnerability and governments' capability to provide fiscal stimulus.  In each specific risk category, as well as the overall rating, each country is rated as Low, Medium-Low, Medium, Medium-High, High or Very High.  Member countries of the European Union and the Organisation for Economic Co-operation and Development are not rated in the 2014 map. 

Country ratings reflect a combination of analysis by Aon Risk Solutions, Roubini Global Economics – a global analysis and advisory firm – and the opinions of 26 Lloyd's syndicates and corporate insurers actively writing political risk insurance.

The online interactive map has data going back over 16 years and also measures banking sector vulnerability, risk to fiscal stimulus and risk of doing business.  By accessing Aon's Interactive Map, institutions can track their specific political risk exposures in emerging markets, both on a current and historical basis.

For more information, visit
Follow Aon on Twitter: http://www.twitter.com/aon_uk
Sign up for News Alerts: http://aon.mediaroom.com/index.php?s=58

About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.

Media Contact:
Sarah Booker
+44 (0)20 7086 4872
+44 (0)7841 865675
[email protected]

Logo - http://photos.prnewswire.com/prnh/20100719/AQ37264LOGO

SOURCE Aon Risk Solutions

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
The BPM world is going through some evolution or changes where traditional business process management solutions really have nowhere to go in terms of development of the road map. In this demo at 15th Cloud Expo, Kyle Hansen, Director of Professional Services at AgilePoint, shows AgilePoint’s unique approach to dealing with this market circumstance by developing a rapid application composition or development framework.
SYS-CON Events announced today Isomorphic Software, the global leader in high-end, web-based business applications, will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Isomorphic Software is the global leader in high-end, web-based business applications. We develop, market, and support the SmartClient & Smart GWT HTML5/Ajax platform, combining the productivity and performance of traditional desktop software ...

ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ --  IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's

"BSQUARE is in the business of selling software solutions for smart connected devices. It's obvious that IoT has moved from being a technology to being a fundamental part of business, and in the last 18 months people have said let's figure out how to do it and let's put some focus on it, " explained Dave Wagstaff, VP & Chief Architect, at BSQUARE Corporation, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo (http://www.CloudComputingExpo.com...
"Our premise is Docker is not enough. That's not a bad thing - we actually love Docker. At ActiveState all our products are based on open source technology and Docker is an up-and-coming piece of open source technology," explained Bart Copeland, President & CEO of ActiveState Software, in this SYS-CON.tv interview at DevOps Summit at Cloud Expo®, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The Internet of Things is not new. Historically, smart businesses have used its basic concept of leveraging data to drive better decision making and have capitalized on those insights to realize additional revenue opportunities. So, what has changed to make the Internet of Things one of the hottest topics in tech? In his session at @ThingsExpo, Chris Gray, Director, Embedded and Internet of Things, discussed the underlying factors that are driving the economics of intelligent systems. Discover ...
SYS-CON Events announced today that Windstream, a leading provider of advanced network and cloud communications, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Windstream (Nasdaq: WIN), a FORTUNE 500 and S&P 500 company, is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, p...
SYS-CON Media announced today that Aruna Ravichandran, VP of Marketing, Application Performance Management and DevOps at CA Technologies, has joined DevOps Journal’s authors. DevOps Journal is focused on this critical enterprise IT topic in the world of cloud computing. DevOps Journal brings valuable information to DevOps professionals who are transforming the way enterprise IT is done. Aruna's inaugural article "Four Essential Cultural Hacks for DevOps Newbies" discusses how to demonstrate the...
The move in recent years to cloud computing services and architectures has added significant pace to the application development and deployment environment. When enterprise IT can spin up large computing instances in just minutes, developers can also design and deploy in small time frames that were unimaginable a few years ago. The consequent move toward lean, agile, and fast development leads to the need for the development and operations sides to work very closely together. Thus, DevOps become...
Verizon Enterprise Solutions is simplifying the cloud-purchasing experience for its clients, with the launch of Verizon Cloud Marketplace, a key foundational component of the company's robust ecosystem of enterprise-class technologies. The online storefront will initially feature pre-built cloud-based services from AppDynamics, Hitachi Data Systems, Juniper Networks, PfSense and Tervela. Available globally to enterprises using Verizon Cloud, Verizon Cloud Marketplace provides a one-stop shop fo...
AppZero has announced that its award-winning application migration software is now fully qualified within the Microsoft Azure Certified program. AppZero has undergone extensive technical evaluation with Microsoft Corp., earning its designation as Microsoft Azure Certified. As a result of AppZero's work with Microsoft, customers are able to easily find, purchase and deploy AppZero from the Azure Marketplace. With just a few clicks, users have an Azure-based solution for moving applications to the...
“In the past year we've seen a lot of stabilization of WebRTC. You can now use it in production with a far greater degree of certainty. A lot of the real developments in the past year have been in things like the data channel, which will enable a whole new type of application," explained Peter Dunkley, Technical Director at Acision, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that IDenticard will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. IDenticard™ is the security division of Brady Corp (NYSE: BRC), a $1.5 billion manufacturer of identification products. We have small-company values with the strength and stability of a major corporation. IDenticard offers local sales, support and service to our customers across the United States and Canada...
SYS-CON Events announced today that AIC, a leading provider of OEM/ODM server and storage solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. AIC is a leading provider of both standard OTS, off-the-shelf, and OEM/ODM server and storage solutions. With expert in-house design capabilities, validation, manufacturing and production, AIC's broad selection of products are highly flexible and are conf...