PHILADELPHIA--(BUSINESS WIRE)--A global survey of challenges facing chief risk officers and senior managers, sponsored by the ACE Group of Companies, indicates that while the majority of companies clearly recognize the importance of political risk in emerging markets, many companies still lack a formal process for managing such risk. Fredrik Murer, Manager, North America Political Risk and Credit, discusses the survey findings in an audio podcast, or Internet-distributed program, and will also present these insights during the upcoming Risk and Insurance Management Society’s (RIMS) annual industry conference to be held in New Orleans, April 29 – May 3, 2007.
According to Operating Risk in Emerging Markets, a global survey conducted by the Economist Intelligence Unit (EIU), implementing a political risk assessment program is becoming more critical now than ever, given the growing interdependence of the emerging and industrialized economies.
This most recent survey from the EIU reflects the opinions of 177 risk managers in Asia Pacific, Australia and North America, and finds that fewer than half of respondents perform an ongoing risk assessment. Eighty percent of respondents consider political and operating risk as part of the due diligence process when an investment opportunity is being considered, while only 44 percent said they monitor and manage risk on a continuous basis once the investment has been made. However, some respondents indicated they have cancelled existing investments because of concerns about political risk, given the volatile nature of these markets.
Mr. Murer commented, “Though it’s true that the risks associated with investing in emerging markets have increased, these risks bring clear investment rewards. Given the fast-changing and volatile environment that characterizes emerging markets, the absence of ongoing risk assessment reported by survey participants is a worrying finding. However, companies are aware of this critical gap and are expanding increasing resources to manage associated risks. Companies invested in emerging markets and who maintain a structured approach to risk management can realize the rewards these markets offer.”
Among the survey’s other findings:
When asked to identify the key operating risks that they face, respondents selected stability of the political regime as the main threat, with 60 percent citing it as either significant or very significant. The extent of disruption and policy shift that accompanies regime change can vary considerably, and is likely to be more acute in emerging markets. Sometimes organizations are forced to change plans as a result of political risk concerns, and roughly 65 percent of respondents reported they cancelled a planned investment as a result of such concerns; 26 percent of survey participants said they had to completely cancel existing investments. The flow of risk information throughout an organization is a key responsibility of a strong, enterprise-wide risk management framework, and survey respondents professed confidence in their ability to report on risks to key managers and executives, with 43 percent saying they are capable in this area.
To access the ACE Political Risk podcast audio program featuring Mr. Murer’s discussion of managing global political risk and the EIU survey findings, please visit www.ace-ina.com/podcasts. Please note, the program is approximately 20 minutes in length.
ACE USA is the U.S.-based retail operating division of the ACE Group of Companies, headed by ACE Limited (NYSE:ACE), and is rated A+ (Superior) by A.M. Best Company and A+ (Strong) by Standard & Poor’s. ACE USA, through its underwriting companies, provides insurance products and services throughout the U.S. Additional information on ACE USA and its products and services can be found at www.ace-ina.com. The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients around the world.
About the research:
The Economist Intelligence Unit (EIU) report, “Operating Risk in Emerging Markets,” is part of ongoing a research program targeted to senior executives responsible for managing corporate risk. It is based on the findings of a survey of 177 senior executives with corporate risk management responsibility from Asia Pacific, Australia and North America. 38 percent of whom are from companies in the financial services sector. The report reflects findings as of February 1, 2007. The above is only a summary of the report and is not a position or opinion of the ACE Group of Companies. The Global Risk Briefing series is also sponsored by the ACE Group of Companies, Cisco Systems, Deutsche Bank, KPMG and IBM.