Aon Political Risk Map - An introduction

2013 Political Risk Map

March 2013

Aon Risk Solutions Global Broking Centre | Crisis Management


History and general overview:

Leading the industry for 15 years


Interactive Map

About the 2013 Aon Political Risk Map

Aon partnered with Roubini Global Economics (RGE), an independent, global

research firm founded in 2004 by renowned economist Nouriel Roubini, to

produce the 2013 Political Risk Map in order to take advantage of RGE’s

unique methodology, Quantitative Country Analytics (QCA), for systematically

analysing political risk around the world.

Aon political risk map is unique as it now follows a 3 layered approach in

analysing political risk in emerging countries (excluding EU and OECD

countries). Country ratings reflect a combination of:

• analysis by Aon Risk Solutions

• analysis by Roubini Global Economics

• the opinions of 20+ Lloyd's syndicates and corporate insurers actively writing

political risk insurance.

QCA as applied to the map allows clients:

• to track changes in countries, systematically

• obtain more meaningful country comparisons and, most importantly

• an ability to decompose each country’s risk to show the various elements that

drive that risk.

2 Aon Risk Solutions | Global Broking Centre | Crisis Management

The Interactive Political Risk Map

2013 is the 15th anniversary of the Political Risk Map and to celebrate, we

have created a fully interactive web based map, to compliment the annual print

version.

The Interactive Map facilitates access to historical and current data as well as

analytics.



Historical Data

The Interactive Map collates 15 years of political risk map data and generates

90 different maps which can show:

• country ratings – changes over time

• risk Icons – changes to and comparative ratings that apply to each country

• a map for each year from a risk Icon perspective

PDF versions –access to each PDF version of the map from 1998 to 2013



Current Data

Risk Icon rankings – every country has all nine risk Icons and these are

graded from Low to Very High

Country summaries – each country has a country summary (from 2010 on)

Quarterly updates - a key feature of the Interactive Map is that it will be

updated quarterly and instantly at the time a key political event



Map analytics - in addition to the current and historical map features, clients

have the ability to track their portfolios of country risk over time.

Map analytics allow clients to analyse a country historically and can compare

different countries against each other over time and with respect to different risk

Icons.

For this Aon has created two analytical tools for:

Country & risk Icon analysis

Exposure analysis


The Interactive Political Risk Map - Map Analysis

Map Analysis helps

clients analyse a

country historically and

can compare different

countries against each

other over time and

with respect to different

risk Icons.


The Interactive Political Risk Map - Exposure Calculator

Exposure Calculator

allows client to enter their

financial exposures

against each country in

the portfolio of countries

in which they operate. It

also demonstrates current

and historic risk changes

by value.



What is new in 2013?


Print version

11

Rating methodology

Country colours

• Risk rating using the three layered

approach

Six core risk Icons for country ratings

• Exchange Transfer

• Sovereign Non-Payment

• Political Interference

• Supply Chain Disruption

• Legal & Regulatory Risk

• Political Violence

Additional risk Icons – for interest only –

new for 2013

• Banking Sector Vulnerability

• Risk to Doing Business

• Risk to Fiscal Stimulus

Aon Risk Solutions | Global Broking Centre | Crisis Management

12

Scope of the map

163 countries and territories rated

12 downgrades (last year there were 21 downgrades)

13 upgrades (last year there were 3 upgrades)

Africa East Asia &

Pacific

Eastern Europe &

Central Asia

Latin America &

Caribbean

Middle East &

North Africa South Asia

Swaziland Thailand Armenia Barbados Bahrain Pakistan

Azerbaijan Guatemala Oman

Belarus UAE

Macedonia

Montenegro

Africa East Asia &

Pacific

Eastern Europe &

Central Asia

Latin America &

Caribbean

Middle East &

North Africa South Asia

Cameroon Moldova Panama Algeria

Chad Turkmenistan Paraguay

Ethiopia Uzbekistan

Madagascar

Mali

Namibia


13

Downgrades & Upgrades Summary

Downgrades - 12

1 moved from High to Very-High

• Chad

6 moved from Medium-High to High

• Algeria

• Ethiopia

• Madagascar

• Mali

• Turkmenistan

• Uzbekistan

3 moved from Medium to Medium-High

• Cameroon

• Moldova

• Paraguay

2 moved from Medium-Low to Medium

• Namibia

• Panama

Upgrades - 13

2 moved from Very High to High

• Belarus

• Pakistan

5 moved from High to Medium High

• Armenia

• Azerbaijan

• Guatemala

• Swaziland

• Thailand

3 moved from Medium High to Medium

• Bahrain

• Macedonia

• Montenegro

3 moved from Medium to Medium Low

• Barbados

• Oman

• UAE


14

2013 Map Key

RISK TO FISCAL STIMULUS:

BANKING SECTOR VULNERABILITY:

RISK TO DOING BUSINESS: 3 new risk

icons


15

Peril spectrum

Countries with all six “core” risk Icons

East Asia & Pacific

Eastern Europe &

Central Asia Latin America

Middle East & North

Africa South Asia

North Korea Afghanistan Argentina Algeria* Bangladesh*

Myanmar* Belarus Ecuador* Egypt* Pakistan

Papua New Guinea* Tajikistan* Honduras* Iran*

Nicaragua* Iraq

Venezuela Lebanon

Libya*

Palestine

Syria

Yemen

* New in 2013


16

Peril spectrum

Countries with all six “core” risk Icons

Africa

Benin* Guinea Bissau

Burkina Faso* Guinea Conakry

Burundi* Kenya*

Cameroon* Liberia*

Central African Republic* Madagascar*

Chad* Mauritania*

Congo Brazzaville* Niger*

Congo DRC Sierra Leone*

Cote d'Ivoire Somalia

Eritrea Swaziland

Ethiopia* Uganda

Zimbabwe

* New in 2013


17

Exchange Transfer

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 29 countries and

territories, including Cameroon, Sri Lanka, and

Ukraine.

This risk Icon is removed in 13 countries, including

Albania, Cambodia, Paraguay, and Zambia.

85 countries have this Icon

What is new

in 2013


18

Sovereign Non-Payment

Sovereign Non-payment: The risk of

failure of a foreign government or

government entity to honor 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.


territories including Gambia, Lesotho, Russia, and

Senegal.

This risk Icon is removed in 7 countries, including Bosnia,

Croatia, Trinidad & Tobago, and the United Arab

Emirates.


What is new

in 2013


19

Political Interference

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 3 countries and territories

including Moldova, Honduras, and Guatemala.

This risk Icon is removed in 14 countries, including El

Salvador, Peru, Thailand, and Zambia.


What is new

in 2013


20

Supply Chain Disruption

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.


territories, including Burundi, Algeria, Mali, and Tunisia.

This risk Icon is removed in 8 countries, including Brazil,

India, Panama, and China.


What is new

in 2013


21

Legal & Regulatory

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.


territories namely Armenia and Mali.

This risk Icon is removed in 10 countries, including Brazil,

Croatia, Peru, and Saudi Arabia.


What is new

in 2013


22

Political Violence

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.


territories, including Argentina, Philippines, Russia, and

Serbia.

This risk Icon is removed in 12 countries, including

Columbia, Kuwait, Indonesia, and Oman.


What is new

in 2013


23

Risk to Doing Business – new 2013

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 is found in 96 countries, including Argentina,

Bolivia, Dominica, Nigeria and Russia

What is new

in 2013


24

Banking Sector Vulnerability – new 2013

Banking Sector Vulnerability: The risk of a

country’s domestic banking sector going into

crisis or 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 is found in 106 countries and territories,

including China, India, El Salvador and Thailand.

What is new

in 2013


25

Risk to Fiscal Stimulus – new 2013

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 is found in 94 countries and territories,

including Albania, Morocco, Liberia, Tanzania and

Uganda.

What is new

in 2013


26

Political Risk Management

Contracts: Government

action that frustrates a

contract, that is, prevents or

restricts the performance of

a contract, or the buyer’s

ability to pay, or the supply

chain

Assets: Government action

that deprives a company of

all or part of its assets (i.e.

interferes with a company’s

ability to own & manage its

investments or stocks)

Political Risk Insurance

Contracts

Exports

Bonds

Imports

Loans

Assets

Equity & Debt

Projects

Plant & Equipment

Commodities


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Summary

163 countries and territories rated

12 downgrades (less than last year – 21)

13 upgrades (where the risk is rated as better than last year - 3)

Additional risk Icons – new for 2013

– Banking Sector Vulnerability

– Risk to Doing Business

– Risk to Fiscal Stimulus


Aon Risk Solutions | Global Broking Centre | Crisis Management 28

Political Risk Map 2013: Launch Date 19th March 2013

Aon Risk Solutions | Specialty | Crisis Management 29

Contacts

Marketing

Ahmed Gawad

+44 (0)207 0864014

[email protected]


Media relations

Sarah Booker

+44.(0)20.7086.4872

[email protected]

Political Risks

Matthew Shires

+44 (0)207 0864373

[email protected]

Visit our website: http://www.aon.com/2013politicalriskmap/index.html

Aon Political Risk Map - An introduction

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