The Nature of Terror Attacks Has Significantly Evolved Over the Last Few Years

In Aon’s 2018 Risk Maps, which covers political risk, terrorism and political violence, it was reported that in 2017 terrorist attacks in western countries doubled compared to that of 2016. However, the total number of casualties in both years were broadly the same, meaning that the lethality of attacks has fallen.

Similarly, 2017 was also a tumultuous year for political risk. In 2017, political risk increased in eleven countries, compared to only two countries that saw reduced risk, showing the persistence of political risk across the globe, highlighted by increases in political violence and supply chain disruption.

Islamic State Poses a Sustained Regional Threat

Despite the absence of a spectacular attack by Islamic State (IS) in Southeast Asia in 2017, the jihadist movement still poses a sustained threat in the region. The threat is most severe in the Philippines, where in May 2017, various IS-linked factions seized control of the southern city of Marawi. To this extent, Indonesia also remains on high alert following recent IS linked church bombings in Surabaya, which were the worst IS inspired attacks for the nation; and the deadliest since 2005.

Australian organisations with stakeholders in Southeast Asia must be vigilant. The Australian government has indicated in 2018 that these IS-linked groups are ‘regrouping’ in the south.

The Threat of Terrorism on Tourism

The tourism industry, one of growth engines of the Australian economy, is highly sensitive to terrorism risk. A major attack can have an immediate and significant impact on leisure travel patterns, and almost guarantees international publicity. In 2017, there were at least 35 attacks worldwide that directly targeted commercial sectors that are critical components of the tourism industry, such as hotels and resorts, nightclubs, civil aviation and visitor attractions.

“More than 80% of all terrorism-related fatalities in Western countries last year occurred in locations where tourists are likely to gather – including hotels, airports, public spaces and entertainment venues.”

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The Balance of Power is Shifting in Asia

Notably, over the last year, Asian countries’ trade linkages have been shifting away from the US and toward China. This is predominantly due to China’s entry into the World Trade Organisation (WTO), its economic development, and its rise as a trade giant. Amid China’s rise, Asia’s exports to the US have edged down from around 23% of total exports in 2000 to stabilize at around 12% in recent years.

As our largest trading partner, Australia relies heavily on China’s economic performance and this shift in power should provide significant opportunities for the Australian economy, in particular those companies supporting the mining sector.

How to Understand Your International Exposures

Whether your organisation is expanding its operation into new markets, or trading with new foreign business partners, organisations must understand their exposures and operational risks. When assessing your organisation’s exposures, organisations should:

  • Identify the risks
  • Assess and quantify the risk
  • Mitigate the risk- Risk transfer
    – Plan for a crisis
    – Test the plan and make changes if necessary

Understanding your international exposures can be difficult. Therefore, enlisting a risk consultant could be your best option. Amongst other things, consultants can help your organisation prepare for, respond to and recover from a variety of disruptive events.

In response to the sharp rise in terrorist attacks and the changing political risk landscape, organisations are increasingly considering risk transfer solutions. To this point, it’s also important to note that under selected crisis management insurance policies, there are funds available for risk consultants that equate to between 5%-10% of the insurance premium. These funds are used to deliver services to reduce the impact of an event; and can be used towards reviewing crisis plans, conducting simulations into terrorism, sabotage, malicious act risks, or training of executive team members in crisis situations.

Australia’s risk rating remains unchanged, however, if your organisation has operations, suppliers or customers overseas, or your employees travel overseas for business, it is important to understand the risks they might face. Visit the 2018 Risk Maps website to understand these exposures and operational risks you may face in challenging geographies.

Alternatively, if you would benefit from further insights into your political risk and terrorism and political violence insurance programs, contact our team today.


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