LONDON, 16 January 2008 – In 25 of the 50 largest global economies, multinational organizations face elevated political and economic risks – including risks of business interruption caused by war, terror attacks and political interference, according to an analysis released today by Aon Corporation (NYSE: AOC).

Among the top 50 economies, the analysis found political and economic risk is at its highest in the oil-rich nations of Iran, Nigeria and Venezuela, where businesses face civil unrest, war, terrorism and nonpayment by governments for services rendered.

While the likelihood of terror attacks, crippling regulatory changes or strikes and civil unrest is relatively low in most of the world’s wealthiest nations, such risks are very real in the nations whose economies are among the fastest growing. For example, companies doing business in Russia face an increased degree of state control in the natural resources sector. Additionally, the global risk management community is increasingly concerned about supply chain risks in Asia.

Terrorism threat remains a factor in the UK in light of last year’s attempted car bombings in London and Glasgow, while the country has been placed on “Credit Risk Negative Watch due to its exposure to the sub-prime credit crunch.

“I have noted a significant increase in the number of CEOs, CFOs and chief risk officers who are seeking a greater understanding of how their businesses are at risk in an increasingly complex global environment versus their primary risk concerns ten years ago,” said Miles Johnstone, director of political risk at Aon Crisis Management. "Risk is one of the fundamental drivers of the global economy, and misunderstanding it can be fatal to a business. As the global business landscape is constantly changing, the Political and Economic Risk Map provides our clients with the proper analytical tools to assess political and economic risk and how it will impact their sustainable growth, continuity and profitability."

The Global Credit Crunch

Slowed global economic growth – particularly in the United States, where falling home values and rising unemployment are contributing to fears the world’s largest economy will sink into recession this year – will directly impact companies’ credit quality, increasing the risk of nonpayment of receivables. 

Some countries, particularly the newer entrants to the global economy, are more likely to be impacted by a global credit crunch. Some examples are Turkey, Hungary and Romania.

Aon’s Global Credit Crunch Index – a new feature in the analysis measuring emerging markets’ exposure to international financial turmoil – lists 25 nations for which exposure to the global credit crunch is other than Low, i.e. Medium-Low, Medium, Medium-High or High.

The Largest and Fastest Growing Economies

While political and economic risks to companies doing business in the United States, Germany and the United Kingdom – the world’s largest, third largest and fifth largest economies, respectively – are comparatively low, companies doing business in those countries are potentially more vulnerable to business interruption due to terror attacks than those doing business in Japan, the world’s second largest economy.

Risk in Brazil, Russia, India, China, South Korea and Mexico is characterized as Medium-Low or Medium. They are the only nations in the top 15 for which risk is not characterized as Low.

• Drilling in an oil field off of Brazil’s southeast coast could lead to greater economic growth in the next five years and position the nation as one of the leading oil exporters in South America.
• In Russia, the economic and political situation is forecast to remain steady through the presidential elections in March 2008 and beyond.
• Discussion of the nationalization of certain industries in regions of India should not contribute to a widening of political and economic risk in 2008.
• In China, continued economic growth could lead to a widening of the economic disparity between rich and poor, which in turn to could lead to a slight rise in political unrest in 2008.
• An improvement in the political climate between the United States, Japan, South Korea and North Korea is expected as new South Korean President Lee Myung Bak takes office in February.  Improved relations between Seoul, Tokyo and Washington are to be expected.
• Despite record revenues of US$100 billion in 2007, Mexico’s state-owned oil company recently reported a decline in output, exports and proven reserves.

Oil

Most of the world’s oil reserves are held by government-controlled oil companies. As the global demand for oil continues to grow in 2008, most of the demand will continue to be met by state-owned companies in nations with elevated levels of political and economic risk.

Editors’ Notes:

Countries among the 50 Largest Economies with Elevated Political & Economic Risk

About the 2008 Political & Economic Risk Map

Aon ranked the political and economic risk of 209 countries and territories, measuring risk of currency inconvertibility and transfer; strikes, riots and civil commotion; war; terrorism; sovereign non-payment; political interference; supply chain interruption; legal and regulatory risk. The risk in each country was ranked as Low, Medium-Low, Medium, Medium-High or High.  A country with an “elevated” risk is defined as any country with a risk ranked at Medium-Low, Medium, Medium-High or High.

The results of the analysis are detailed on the 2008 Political & Economic Risk Map, produced by Aon Trade Credit in partnership with Oxford Analytica, an international consulting firm. Oxford Analytica draws its analysis from a global network of more than 1,000 experts – including senior faculty members at Oxford University and at major research institutions worldwide – to make independent judgments about geopolitical risk.

The political & economic risk map is published annually by Aon Trade Credit Global, a unit of Aon Corporation.  With more than 400 specialists in 60 offices around the world, Aon has been providing political risk and trade credit insurance and consulting services such as country audits, since 1912.

About Aon

Aon Corporation (NYSE: AOC), ranked by A.M. Best as the number one global insurance brokerage based on brokerage revenues and voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm by the readers of Business Insurance, is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 43,000 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.

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