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Five disruption risks to put on the corporate radar

Five disruption risks to put on the corporate radar

In the fast-paced global market, a localised event can quickly disrupt the international operations of large companies. For organisations to protect their three core vulnerabilities – their people, their assets and their brand – it is critical they understand emerging ‘disruptors’ before they develop into a fully fledged threat. We’ve canvassed our global team of analysts to ask them what issues might not be making headlines right now, but which could quickly escalate to affect global organisations. They identified several sources of potential disruption that could expose any one of the three key vulnerabilities and that firms should put on their risk mitigation radars.

Protecting people

Dominic Simonis-Law

Global Content Lead - Security and Disruption Risk

South East Asia: the new IS frontline?

While the world’s eyes are fixed on the demise of the so-called Islamic State in Syria and Iraq, urban populations in some South-East Asian countries, such as the Philippines, Indonesia and Malaysia, are facing an increasing threat of terrorism inspired by the group. With regional cities looking to develop manufacturing capabilities and attract foreign investment, the risks to staff moving into the area are becoming more pronounced.

South-East Asia is fertile ground for IS, and the group’s propaganda increasingly features local militants appealing directly to their fellow citizens. As IS faces defeat in Iraq and Syria, there is a strong possibility that South-East Asia will become the group’s new centre of gravity, strengthened by the return of some of the 1,000 militants who were estimated to have travelled to the Middle East.

The most likely scenario facing regional cities will be lone wolf attacks executed by returning fighters. The European experience shows how difficult it is even for well-prepared cities to defend against these attacks. The significant threat of terrorist violence in South-East Asia is clearly reflected in the map below, which is dominated by the red of extreme risk. As Indonesia and Malaysia vie to grow their manufacturing base, the influx of workers into urban industrial areas will be exposed to this uptick in violence.

Threat of terrorism in South-East Asia

Source: Verisk Maplecroft

Rich Hewston

Global Content Lead - Environment

Extreme flooding in Mumbai becoming more common

Threats to personnel are not only man-made – extreme weather has the capacity to disrupt whole regions. Catastrophic flooding caused by hurricanes in the Caribbean and US have been widely covered this year, but severe storms in South Asia have received less coverage. More than 1,200 people have died and up to 40 million people were affected in India, Bangladesh and Nepal after storms on 29 August 2017.

This level of flooding is of particular concern to the finance industry, reliant as it is on skilled staff based in and around Mumbai to provide back-office support. Aside from the risk to life posed by these floods, they disrupt commuter bus and rail services and thus starve the financial centre of the personnel it needs to operate.

The fact that Mumbai flooded after a summer monsoon is not unusual – our Severe Storm Hazard Index categorises the city as medium risk, with a score of 6.13 out of 10.00. What is unusual is the level of flooding. The last time Mumbai experienced such catastrophic flooding was in 2005, when the clean-up cost came to nearly USD900 million. Given the current inadequacies of the drainage infrastructure, and the likelihood of more of these extreme rainfall events in the future, flooding is likely to disrupt the city’s finance sector on a much more frequent basis.

Severe storm hazards in India

Source: Verisk Maplecroft

Safeguarding assets

Emma Gordon

Senior Analyst

Worsening civil unrest puts Ugandan mining operations at risk

One emerging concern for the extractive sector is inter-ethnic fighting in western regions of Uganda. President Museveni’s gerrymandering – part of his attempts to improve his standing in the region - has stoked these tensions and the situation looks unlikely to resolve during this presidential term. Currently the violence is only reported in the Ugandan press where it is treated as simply the latest example of fighting between traditional kingdoms.

The violence has so far been concentrated around the Rwenzururu kingdom and Kasase town, posing a risk to operations at local cobalt, copper and nickel mines. The situation is deteriorating, however, and the country’s score in our Political Violence Index has slipped from low risk (8.38/10.00) to medium risk (7.23/10.00) between the first and third quarters of this year. There is a significant risk that the tribal violence will spill over to the Tooro kingdom, which would disrupt the growing gold industry and threaten Uganda’s second largest export.

Michelle Carpenter

Analyst

Land conflict disrupts Oil and Gas in Argentina and Peru

Latin America has also seen conflict threaten the extraction of raw materials. Indigenous groups in Argentina and Peru have caused disruption to oil and gas operations. In Argentina, the death of a Mapuche activist after his disappearance in August 2017 has brought the issue of indigenous land rights firmly onto the public agenda and threw the Macri administration into a political crisis ahead of the October elections. The President will now face continued post-election pressure as the investigation into Maldonado’s death puts democratic institutions to the test.

Oil and gas companies hoping to exploit the Vaca Muerta shale formation are likely to be met by direct action from the Mapuche, who have already closed roads and prevented access to drilling sites in Loma La Lata and Loma Campana. Even when companies have managed to keep their drill sites open, they have had to pay higher compensation payments to indigenous groups. YPF, Argentina’s largest oil company, reported that its payments to the Mapuche have doubled since 2014.

The story is similar in Peru, where local indigenous populations are blocking access to the Lot 192 oil field in the Amazon region. This is in response to the government’s failure to conduct additional consultation with locals following changes to operations at the field. However, an appeal lodged by indigenous rights groups was dismissed in September 2017, meaning affected communities will likely turn to direct action. With Argentina and Peru scoring as high or extreme risk in the Indigenous Peoples’ Rights Index over the last 12 quarters, this potential for disruption will increase.

Comparative risk table

Source: Verisk Maplecroft

Safeguarding brand

Daragh McDowell

Principal Analyst

2018 Russia World Cup: a ‘perfect storm’ for corporate sponsors?

When companies decide to use their brand to sponsor events it can become a double-edged sword – leading to international exposure that can turn negative. Verisk Maplecroft is monitoring events in Russia closely in the run-up to the FIFA World Cup in 2018. Companies that would normally be interested in sponsoring such a global sporting event are no doubt paying close attention too. Russia’s global reputation has been dented over the last five years by a series of political developments: from Moscow’s military intervention in Ukraine, the prohibition of ‘gay propaganda’ in 2013, and alleged interference in the US presidential election.

Global organisations are unlikely to be deterred from sponsoring major sporting events but the risks attached to WC 2018 carry a high profile, given the exploitation of migrant workers in the run-up to the 2014 Winter Olympics in Sochi, the racial intolerance at the Euro 2012 football championships in Ukraine, and the violence that marred the Euro 2016 games in Marseilles. The combination of Russia’s tarnished reputation politically, and the potential for racist violence presents a reputational ‘perfect storm’ for sponsors. Any organisation sponsoring a team or the wider event is likely to face significant public scrutiny and will require robust crisis management plans in place to deal with the fall-out from issues arising during WC 2018.

Russia 2017-Q3 Risk table

Source: Verisk Maplecroft

Anticipating threats to your business operations

Fully understanding how seemingly isolated world events could threaten your people, assets and brand is critical. But the real prize is anticipating where the next disruption is coming from. Taking a holistic approach to risk and understanding the drivers of issues as they emerge might just give you the edge you need so you can see what’s coming over the horizon.

Verisk Maplecroft’s Disruption Risk Service combines over 150 global risk indices across security and politics, to natural hazards, health and economics, with written insights from our team of risk specialists. We give you a deep understanding of the potential disruptions your operations face today, as well as highlighting what’s coming over the horizon.

The service enables you to fuse your data with ours, providing a holistic view of risk down to the site-level. Combined with a curated flow of relevant research, tailored to support executive briefings, we help you stay on top of developing trends and take a more proactive approach to disruption response.

To learn more about Verisk Maplecroft’s Disruption Risk Service contact info@maplecroft.com

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