operational risks Assessing
Events over the last two years indicate tumultuous times to come in the Middle East. Through oEvents over the last two years indicate tumultuous times to come in the Middle East. Through our in-region intelligence resources and global assets, we make ongoing country e share with clients together with r in- Events over the last two years indicate tumultuous times to come in the Middle East. Through our in- region intelligence resources and global assets, we make ongoing country risk assessments which we share with clients together with more specific advice. Looking more generally there are two aspects to the changes in the Middle East: the fundamental drivers, and the acute variables.
Fundamental drivers Global economic recovery is well underway with significant injections of financial assistance from the G20 and other countries since 2008. Nevertheless there has been an increase in unemployment and under-employment, especially in the more developed countries. Fiscal deterioration during the crisis was higher in advanced economies than in emerging or developing countries.
A shift has occurred in economic and political power from the developed to the emerging markets (specifically the BRICs). With the trend towards urbanization, new mega-cities are emerging in fast- growing economies in South and
South-East Asia and Latin America. Food and fuel prices have risen sharply since mid-2010, reflecting the ongoing social unrest. Countries in the Middle East and Northern Africa are among the most exposed to rising food prices due to high imports of basic goods like wheat.
Acute variables Contested political successions in the Middle East and Africa – with aging rulers, opaque regimes and elite structures – precipitated political instability in the region. Upcoming elections in sub-Saharan Africa could potentially cause destabilization and violence on the continent.
Austerity issues bring threats to European countries following the global financial crisis and consequent recession. Europe has yet to get a grip on its various sovereign debt crises, and populations throughout the region have started pushing back against sizeable cuts to public spending.
Velocity of information is accelerating (for example through social media and Wikileaks), with expanding inter- connectivity and exponential growth in the rate of internet and mobile users in many emerging countries. There is nothing deterministic about social networking or mobile communications, but unrest in the Middle East suggests that access to information – even ‘old media’ like Al-Jazeera – is a critical variable shaping the protests.
Possible implications for multi- national companies and investors in these regions
As a result of the changing political and security situation, risks increase and investments can look different. There are three key things to look out for.
1. Nature of governments that come 1. to power: whether or not they 1. 1. have a more populist political 1. 1. slant that could raise risks in key 1. sectors; their trade policies and 1. 1. liberalization (relaxation of 1. 1. 1. previous government restrictions 1. in the areas of social or economic 1. policy).
2. A stable region can no longer be 1. assumed: businesses and 1. 1. 1. investors may have to re-1. 1. 1. 1. negotiate relationships and the 1. 1. business climate could be less 1. 1. stable.
3. Ambient security risks: there has 1. not been major targeting of 1. 1. 1. foreign assets or companies – 1. 1. just some very sporadic 1. 1. 1. 1. incidents. But this is always 1. 1. 1. something to consider, 1. 1. 1. 1. particularly in light of attempts by 1. militant groups to take advantage 1. of security vacuums.
Control Risks, the world's leading business risk consultancy is International SOS' joint venture partner to provide travel security services to multi-national organizations.
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