Under attack: global business and the threat of political violence
Global terrorism is one of the greatest threats for the business world. Around 20 per cent of today's terrorist attacks are aimed at the business community. A recent Lloyd's report surveyed 154 board-level executives on the issue of political violence.
Over a third of companies avoid investing in overseas markets for fear of political violence, while 20 per cent have forgone promising business opportunities for the same reason.
The recent Lloyd's report, Under Attack? Global business and the threat of political violence, surveyed 154 board-level executives on the issue. It concluded that business leaders believe they are operating in an increasingly dangerous world, and having to focus on the risks they face from terrorism and political violence. It also leaves little doubt that terrorism and political violence have a significant impact on businesses' strategy and operations – from employee vetting to whether or not to invest in a given location.
The financial impact of terrorism or political violence is high, with one estimate suggesting that the costs of political risk to the global economy could be $1 trillion. But the costs due to lost opportunities could be even higher. Many businesses are avoiding investing in politically sensitive areas or locating offices in large cities to avoid 'hot spots'. In fact, over a third of companies avoid investing in overseas markets for fear of political violence, while 20% have forgone promising business opportunities for the same reason. So with boards making decisions to invest or operate in certain areas based partly on the risks involved, the importance of having the correct information has never been greater.
So are businesses getting the right information about these risks?
According to the Lloyd's report, probably not. There appears to be a significant gap between growing risk awareness and tangible action actually taken by many companies, driven by a lack of understanding of the dynamics they encounter as they globalise. Alarmingly, only one in three business leaders believe their companies have a good understanding of the political violence risks they face, while two thirds report that they rely on international media as a source of information on political violence risk.
This becomes a problem when 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. It is worrying that, with increased awareness, only one in five companies seek out information from specialist consultants, academics or Non Governmental Organisations (NGOs), despite all three usually being of high quality, and the last two often providing their services for free.
While businesses seem to have a base awareness of the risks they face, they do not seem to have risk mitigation strategies. Approximately 37% of all companies surveyed – and half of smaller businesses – reported that they had either no continuity plan in place at all, or one that does not adequately take account of political violence risks. Having the correct information about these risks will not make any difference if there is no plan in place to mitigate against them. A key step to preparing for these risks is to understand the threat, and then to address it rather than to 'go low' in the event of a risk event. Knowing the environment and community a company operates in may help.
A growing number of policymakers and NGOs believe a company's presence and engagement in economic development initiatives can create a more stable operating environment and improve community relations. This means that the most effective course of risk avoidance may not be to pull out of troubled areas, but to get more involved with communities. A growing body of opinion therefore suggests that more active engagement can deliver real benefits to organisations. With business leaders believing they are now at as much risk of attacks as governments, this means they also have a role to play in minimising the risks. This does not mean trying to solve political problems, but driving economic development in ways which can help to deliver a more stable operating environment.
It is clear that companies need to take a more thorough approach to research, preparation and risk mitigation. A number of companies are simply not ready to deal with the risks they face, with many not even following the basic steps, such as using expert opinions, to assess the risk, or keeping an up to date business interruption plan. Of those that currently have the correct systems in place, a large number need upgrading to address changing threats to supply chains and emerging risks. Terrorism and political risk is an evolving and fast changing threat, the solutions have to be fast-changing too
