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Lloyds Risk Index 2011

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The Lloyd\'s Risk Index, based on a survey of over 500 global business leaders shows a disparity between actual events and their ability to deal with risk. In a year of unprecedented economic and ...

The Lloyd\'s Risk Index, based on a survey of over 500 global business leaders shows a disparity between actual events and their ability to deal with risk. In a year of unprecedented economic and political turmoil are businesses prepared for the risks they face - or do they just think they are?

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    Lloyds Risk Index 2011 Lloyds Risk Index 2011 Document Transcript

    • LLoyd’sRIsK INdEX2011Featuring content by
    • REspoNdENt pRoFILEs WHICH OF THE FOLLOWING WHAT IS YOUR COMPANY’S ANNUAL WHAT IS YOUR DESCRIBES YOUR JOB TITLE? GLOBAL REVENUE IN US DOLLARS? PRIMARY INDUSTRY? Financial services 18.6% Professional services 13.2% Manufacturing 10.4% % % IT and technology 9.8% Energy and natural resources 8.6% Healthcare, pharmaceuticals and biotechnology 4.8% Entertainment, media and publishing 4.4% Construction and real estate 4.2% Board member 8.5% $499m or less 51.0% Retailing 3.2% CEO/President/Managing director 52.7% $500m to $999m 14.9% CFO/Treasurer/Comptroller 15.6% $1bn to $4.999bn 17.1% Consumer goods 3.0% CRO/Chief risk officer 3.8% $5bn to $9.999bn 5.4% CIO/Technology director 5.7% $10bn or more 11.6% Agriculture and agribusiness 2.6% Chief compliance officer 0.6% Other C-level executive 13.1% Chemicals 2.6% Education 2.6% Telecommunications 2.6% IN WHAT REGION ARE YOU PERSONALLY BASED? Transportation, travel and tourism 2.6% Aerospace/Defense 1.8% Government/Public sector 1.8% Logistics and distribution 1.8% North America Europe 27% 35% Automotive 1.6% Asia-Pacific 27% Rest of the World 11%Lloyd’s Risk Index 2011
    • 01coNtENts Introduction Foreword by Richard Ward, Chief Executive, Lloyd’s 02 Executive summary of findings from the Economist Intelligence Unit (EIU) 03 01 02 03 the top mind the Risk awareness five risks (reality) gap rises in the east Loss of customers 10 Political, crime and security risks 16 An increased appreciation of risk 24 Talent and skills shortages 11 Environmental risks – a balancing act for business 19 Reputational risk 13 The selective invisibility of natural hazards 20 Currency fluctuation 13 Changing legislation 14 conclusions Conclusion 26 Appendix and methodology 27Lloyd’s Risk Index 2011
    • 02 INtRoductIoNFoREwoRd FoREwoRd by dR RIchaRd waRd RIsK awaRENEss RIsEs IN thE East In 2009 much of the world held its breath as Fascinating too, is the speed at which risk we watched banks fail, high street businesses awareness in the East has grown. The rise in collapse and the damaging impact of the the scores given across all categories of risk, credit crunch on the ‘real economy’. It was compared to 2009, by Asia-Pacific respondents in that highly charged context that Lloyd’s, in is significant, as is the increase in levels of collaboration with the Economist Intelligence business preparedness to deal with them. Unit (EIU), published its first global survey1 Interestingly, these greater scores do not apply on risk attitudes amongst business leaders. only to natural hazards, of which Asia-Pacific has had direct recent experience, but across all Two years later, global economies remain in five categories of risk surveyed. This awareness a state of flux, with growing debate on how presents both risks and opportunities for long it will take to play out, as we see with domestic and international business, as the the current political and sovereign debt crisis. new world balance of economic and political This second Lloyd’s Risk Index, based on a power shifts. survey of global business leaders by the EIU, REaLIty aNd pERcEptIoN at odds shows that their perceptions of risks have Business leaders have scored themselves evolved significantly in the intervening two as more than adequately prepared for 48 years. In all regions of the world, across all out of the 50 risks. For Lloyd’s, and for the sectors, business leaders now perceive the The last two years have world as an inherently riskier place. insurance industry as a whole, the fact that this ‘preparedness gap’ exists for only two thrown the world into As we look at these changing priorities in of the listed risks, compared to eight in economic and political more detail in this report, three key strands 2009 is interesting. I welcome any increase turmoil from which it emerge from the findings. in the implementation of formal risk systems, but businesses also need to recognise such has yet to emerge. FRom cREdIt cRuNch to taLENt cRuNch systems cannot anticipate so-called ‘black swan’ There has been a change in emphasis in events. When it comes to risk management business risk rankings. In 2011, businesses planning businesses need to increasingly are less concerned about the availability of think the unthinkable in order to identify all credit and more worried about the loss of their vulnerabilities and minimise them. customers and orders created by a new age of austerity in the West. In the last two years, the world has been thrown into economic and political turmoil More surprising is the way that the risk posed from which it has yet to emerge. It will be by talent and skills shortages has shot up the intriguing to see the impact on business list to become the second highest priority for attitudes over the next two years, when we businesses. There are a number of theories publish the third Lloyd’s Risk Index in 2013. as to why this move from credit crunch to talent crunch has occurred, some of which we outline in this report. We hope it will DR RICHARD WARD encourage debate about how businesses can Chief Executive manage this escalating risk more effectively. Lloyd’sLloyd’s Risk Index 2011
    • 03EIu EXEcutIvE summaRy Prepared by the Economist Intelligence about thIs EXEcutIvE summaRy In this summary, we identify the key risk areas Unit for Lloyd’s of London* The aim of this executive summary, based by looking thematically at the overall risk on findings and analysis from the EIU and ratings, the top risks and the biggest changes commissioned by Lloyd’s, is to assess corporate from 2009. We also examine the survey risk priorities and attitudes around the world. results through a regional lens for the biggest The findings are based on a global survey of differences in relation to current economic, over 500 C-suite and Board level executives political and commercial operating contexts. conducted in August 2011. Survey respondents were distributed across summaRy oF INsIghts Europe (35%), North America (27%) and Three years on from the start of the worst Asia-Pacific (27%), with the rest of the world financial crisis for more than a generation, comprising about 11%. Financial services there is still uncertainty about the future. Will provided the largest number of respondents at we manage to avoid a double-dip recession 19%, followed by professional services at 13%, and emerge into a period of growth? If we manufacturing at 10% and technology at 10%. do, will it be strong growth, or a prolonged The remaining 48% of respondents represent period of slow progress, as many economies a wide range of other industries. Around half are currently experiencing? of respondents represent corporations with annual revenues of over $500m. How can businesses manage risk in this The combination of In this summary, we examine some of the environment? The financial crisis has undoubtedly reduced global economic global shocks through over-arching trends and themes emerging resilience and, as the World Bank argues increasingly interlinked and from the 2011 survey. We also identify major in its 2011 report on the macroeconomic shifts from the 2009 survey and report, interdependent systems Lloyd’s 360 Risk Insight: Risk Priorities and risk landscape, the combination of global shocks through increasingly interlinked and has raised the threat levels Preparedness. We would like to thank the interdependent systems has raised the threat respondents who took the time to participate of risk across the board. in the survey. level of risks across the board. Economies in many developed countries are weighed down with debt and face years of sluggish growth, and may lack the agility required mEthodoLogy to efficiently manage external factors in The survey examined attitudes to risk across this context. Meanwhile, Asia’s 3.5 billion five key categories: consumers and dynamic market environment > Business and strategic risk may provide a massive growth opportunity. > Economic, regulatory and market risk A number of interesting insights and > Political, crime and security risk consistent themes can be seen emerging > Environmental and health risk, and from the survey. There is a greater sense > Natural hazard risk. of preparedness to address risk across the Respondents to the survey were asked to rate world’s boardrooms, a significant global both the overall risk category and a series of key disparity across the entire risk arena between risks within each category against their corporate East and West and a heightened sense of risk priorities and degree of preparedness to priority across all risk categories. manage those risks. A score was calculated for Anything high on an executive’s risk priority each where zero represents the lowest level list can be considered in terms of a potential of priority or preparedness and ten represents critical point of failure for business; some the highest. significant changes in the risk landscape over Some new risks have been added to the 2011 the past two years reflect new critical points survey from the 2009 version. These enable of failure, such as risk of talent shortages. us to explore in greater detail the role of Yet, while executives’ attitudes to risk do government, demographic forces, and global not suggest they are anticipating a new era resource issues such as food security and of growth, their leading concern – that they water scarcity, all of which we believe will will lose customers – shows that fear of give a more complete picture of corporate a double-dip recession is high up in their risk priorities in 2011. thinking. Uncertainty is still the issue of the day. * The EIU bears sole responsibility for the content of this executive summary. The EIU editorial team executed the online survey, conducted the analysis and wrote this summary.Lloyd’s Risk Index 2011
    • 04 introductionEIu executive summarycontinued KEy INsIghts aNd thEmEs Chart 1 All overall risk priorities are notably compared to two years ago, how are you higher than two years ago, with Asia prepared for risks to your business and leading the way. operations? While risk priorities generally increased across all five risk categories globally, the East drove this increase with an average overall priority score increase of 26% since 2009, compared with only 4% in Europe and North America. 70% The global imbalance between high and low growth economies is no doubt driving the regional disparities. But the notable overall increases are likely to be a combination of this and other factors, including the state of longer-term economic uncertainty in the current business environment. The survey suggests that the discipline of risk management are better prepared has also become more important, and this is demonstrated in many practical ways. Businesses feel distinctly better prepared to manage risks to their business and operations than they did two years ago. Our survey finds that a strong sense of preparedness prevails in boardrooms around 27% are about 3% the same are not well the world. More than 70% of survey respondents prepared report that their company is better prepared to manage business and operational risks than they were two years ago, and fewer than 3% say they are less prepared. This is a markedly different result from our 2009 survey, when we found ‘preparedness gaps’ (defined as risks where the preparedness score was not as high as the priority score), in eight out of 41 individual risks, compared with only two out of 50 in 2011. One should not ignore the fact that, for many companies, there will be a difference between actually being prepared and simply believing that they are prepared. But in view of the severity of financial and natural disasters over the past three years, and the rise in practical risk management measures internally, perhaps executives themselves have re-calibrated, for the better, what it means to be prepared.Lloyd’s Risk Index 2011
    • 05Overall business and strategic risks, as Environmental and natural hazardswell as economic, regulatory and market are seen as lower priorities overall.risks, still dominate risk priorities globally. Risks concerning natural hazards, andAlthough business and strategic risks overall longer-term environmental trends suchedged past economic, regulatory and market as climate change, still tend to be of lowerrisks for the top priority spot this year, the scores and less immediate concern to board-levelfor both were high (7.3 and 7.2 respectively). executives. ‘Black swan events’, which haveThere are some regional differences in whether a relatively small probability but a high impact,one or the other of these risk categories is tend to be low on our survey respondents’ listseen as the top priority, but it is important to of priorities. Despite the relatively high profilerecognise that globally, the top three risks are of global issues such as food security andall business and strategic risks: loss of customers water scarcity, these are also perceived to beand orders, talent and skills shortages and a low priority, as are demographic factors –reputational risks. Meanwhile, the next five although there are notable regional differences.are all economic risks: currency fluctuation, What is also particularly interesting this year,changing legislation, cost and availability of is that environmental and health risks increasedcredit, price of material inputs and inflation. in priority by the greatest amount, despite still remaining at a moderate risk priority level overall. Pollution and environmental liability is the top risk in this category, probably reflecting the anticipated costs of increased regulation. The companies which may be hit hardest by these costs are those with operations in countries such as China, where environmental regulations are currently well behind those in the West, but are likely to catch up quickly.table 1. overall risks, 2011 versus 2009 *2011 2011 2011 2009 2009Priority priority preparedness Priority PreparednessRank overall Risks score score Score Score1 busINEss aNd stRatEgIc RIsK 7.3 7.1 6.5 6.02 EcoNomIc, REguLatoRy aNd maRKEt RIsK 7.2 6.5 6.8 5.83 poLItIcaL, cRImE aNd sEcuRIty RIsK 5.4 6.5 4.9 5.14 ENvIRoNmENtaL aNd hEaLth RIsK 5.0 6.1 4.0 5.15 NatuRaL hazaRd RIsK 4.2 5.5 3.9 5.4* The survey conducted in 2009 offered respondents a list of 41 risks. The 2011 Lloyd’s Risk Index updated this list to reflect the current risk environment by removing some of these risks and adding others. A full list of these removals and additions can be found in the Appendix. This means that the 2009 and 2011 rankings are not statistically directly comparable, although they do offer an insight into changes in both perceptions of risk priority and preparedness over the last two years.Lloyd’s Risk Index 2011
    • 06 introductionEIu executive summarycontinuedChart 2individual risks, priority and preparedness scores 2011Risk1 Loss of customers/Cancelled orders Business 6.2 6.32 Talent and skills shortages (including succession risk) Business 6.2 5.93 Reputational risk Business 5.8 6.64 Currency fluctuation Economic 5.6 5.95 Changing legislation Economic 5.6 5.46 Cost and availability of credit Economic 5.5 6.47 Price of material inputs Economic 5.4 5.78 Inflation Economic 5.4 5.59 Corporate liability Business 5.4 6.610 Excessively strict regulation Economic 5.4 5.611 Rapid technological changes Business 5.3 6.112 Cyber attacks (malicious) Political 5.3 6.013 High taxation Economic 5.2 5.514 Failed investment Business 5.2 6.115 Major asset price volatility Economic 5.2 5.716 Theft of assets/Intellectual Property Political 5.2 6.117 Fraud and corruption Political 5.2 6.318 Interest rate change Economic 5.1 6.019 Cyber risks (non-malicious) Political 5.1 6.220 Poor/incomplete regulation Economic 5.0 5.421 Critical infrastructure failure Business 4.9 5.922 Government spending cuts Economic 4.9 5.423 Supply chain failure Business 4.8 6.124 Pollution/environmental liability Environmental 4.7 5.725 Sovereign debt Economic 4.6 5.2Score – out of 10 0 1 2 3 4 5 6 7 Priority PreparednessLloyd’s Risk Index 2011
    • 07Risk26 Increased protectionism Economic 4.6 5.427 Industrial/workplace accident Environmental 4.6 6.228 Energy security Business 4.5 5.829 Insolvency risk Business 4.5 6.230 Demographic shift (eg ageing population, youth emigration) Environmental 4.4 5.231 Strikes and industrial action Political 4.2 5.832 Climate change Environmental 4.1 4.833 Pandemic Environmental 4.0 4.734 Piracy Political 3.9 5.635 Water scarcity Environmental 3.9 4.936 Terrorism Political 3.9 5.037 Urbanisation Environmental 3.9 5.138 Population growth Environmental 3.8 5.139 Riots and civil commotion Political 3.7 5.140 Food security Environmental 3.6 4.841 Harmful effects of new technology Environmental 3.6 4.742 Flooding Natural 3.6 5.243 Expropriation of assets Political 3.4 5.244 Earthquake (including tsunami) Natural 3.3 4.545 Abrupt regime change Political 3.3 4.846 Windstorm (eg hurricane, cyclone, typhoon) Natural 3.2 4.547 Drought Natural 3.0 4.448 Threats to biodiversity Natural 2.8 4.349 Impact of space weather (eg solar flares) Natural 2.6 3.850 Volcanic eruption (including ash) Natural 2.4 4.0Score – out of 10 0 1 2 3 4 5 6 7 Priority PreparednessLloyd’s Risk Index 2011
    • 08 introductionEIu executive summarycontinuedLoss of customers is seen by businesses The top economic risk priorities There is an imbalance betweenas the leading risk. have become more sophisticated. East and West.During times of economic uncertainty, sensitivity The uncertainty that dominates global business When exploring the main themes emergingto losing customers becomes a critical point is reflected in the economic risk priorities of from our survey, significant regional and sectorof failure for businesses. In Asia, for example, the respondents to our survey. A good deal disparities emerge. There is a significantwhere the economy is dominated by tradable of the uncertainty is likely to be caused by an imbalance in the consumer sector, where Asia,goods, sensitivity to losing customers is more expectation that regional current events may particularly China, is faring very well and Europeabrupt; businesses in this region were hard hit escalate to cause bigger, global problems. and the US are struggling. Certainly, one of thein 2008, but recovered quickly in the following There are very real threats to the eurozone’s key challenges for policymakers at this timeyear – a relatively quick recovery is possible in economic stability, for example, as problems is to make allowances for the ways in whicha goods-dominated market. In the West, where have spread from Ireland and Greece to Italy, other regions will manage their own economicservices comprise a significant portion of the Spain and France. Meanwhile, there is ongoing policies. In the US and Europe, emerging fromeconomy, companies continue to look for new uncertainty caused by the downgrading of the recession, or avoiding a double-dip recession,market opportunities, particularly in regions US credit rating in August of this year, and also has not typically been consumer-led in thewhere the cost of capital has gone down. The concern that inflation may escalate in the East past, but stimulated by government policy, assurvey suggests that companies understand unless exchange rates are carefully managed. well as innovation, particularly in technology.that the most successful strategy for shoring Survival was certainly the theme of 2008-2009, One of the developments we may be seeingup against the threat of recession is to attract when cost and availability of credit and in the higher risk scores across Asia-Pacificand retain customers. currency fluctuations were the top two global is a lack of confidence that they will continue risk priorities. These are still in the top ten, to be able to achieve the kind of growthRisk of talent shortage has escalated but the picture is now more complicated. generated in the past. Their export opportunitiesdramatically. Corporate leaders also recognise the critical are shrinking and many are looking to moreThe risk of talent and skill shortages rose from role of policy such as legislation and exchange dynamic markets closer to home as beinga relatively lowly 22nd ranked priority in 2009 rate policy and its impact on inflation, on more promising sources of long-term growth.to 2nd in 2011, and companies feel relatively their businesses. Linked to this is the price of And the region’s 3.5 billion consumers stillless able to manage this risk. A number of material inputs, which have risen substantially provide a massive growth opportunity.pressures are likely to have driven this shift, in priority in our survey rankings.including demographic (China, for example,has a large population of young and old people,but a deficit of working-age, professionalworkers), competitive (including the need forinnovation and entrepreneurship to help leadthe West out of recession) and productivity(doing more with less). The search for talentis also much more acute in the Asia-Pacificregion. In our survey, 70% and 60% ofrespondents from the Asia-Pacific regionand the rest of the world respectively, ratedtalent as high or very high priority, comparedto only 42% and 45% of respondents inEurope and North America respectively.Lloyd’s Risk Index 2011
    • 09 01 thE top FIvE RIsKs Loss of customers 10 Talent and skills shortages 11 Reputational risk 13 Currency fluctuation 13 Changing legislation 14Lloyd’s Risk Index 2011
    • 10 sEctIoN onethE top FIvE RIsKs thEN aNd Now – what has chaNgEd? The risk posed by ‘talent and skills shortages’ In 2009, the top three risks prioritised by has shot up the Index since 2009, rising from business leaders were direct responses to the a mid-list ranking in 2009 to number two today. liquidity crisis which began in 2008 – the cost More optimistically, the biggest reduction in and availability of credit, currency fluctuation priority has been ‘insolvency’, which has dropped and insolvency risk. from third place in 2009 to just 29 in 2011. Two years later, as governments, businesses The last two years have seen major reputational and individuals have started to tighten their crises, such as Deepwater Horizon and recalls belts and deal with their debts, the availability by car manufacturers, particularly in Europe of credit has dropped from the number one risk and the US and their impact on the bottom line to number six, replaced by loss of customers is reflected in the rise of reputational risk from and orders as businesses’ primary concern. nine in 2009 to number three in 2011. Currency fluctuation does, however, remain Other notable changes include the increased a serious cause for concern, moving from weighting given to the cost of materials from number two to number four. 17 in 2009 to seventh today, reflecting the major price hikes of commodities including energy and many raw materials. Businesses are generally much better capitalised of the PIIGS (Portugal, Italy, Ireland, Greece and top FIvE RIsKs 2011 than they were two years ago. From concern Spain) is affecting global stock markets from about the availability of credit, business leaders New York to London and dramatically reducing 1. are now facing an even more fundamental risk; the evaporation of those wanting – or able – the world’s wealth. According to research by the Federal Reserve Bank San Francisco5, Loss of to buy. the financial crisis has wiped out 25% of the US’s net worth and the crisis of the euro may There are multiple reasons for this loss of mean Europe fares even worse. customers consumers. Western governments have prioritised the need to drive down their deficits Emerging economies such as India and China and are cutting back both on investment are changing focus as they deal with the dual and public services – as customers they are issues of reduced international demand and retrenching. At the same time, the high cost encouraging domestic consumption. These of many materials and of energy is driving up growing markets present huge opportunities inflation, making products more expensive to for domestic and international companies buy. Faced with the triple factors of static or alike. It’s estimated, that China has over 10 falling incomes, rising inflation and widespread million Small and Medium-sized Enterprises job insecurity, consumers in North America and (SME’s)6 and financial services, for example, Europe are paying down their debts, buying currently have low market penetration. less and buying more cheaply when they do. Against a background of dwindling demand for Nor are they confident about the future. In goods and services, supply chain failures or September 2011, consumer confidence across reputational damage can mean the difference much of the West was weak; in Italy 2 it was the between business survival or collapse. As worst for three years, France3 registered the margins are increasingly squeezed, mitigating weakest level since February 2009 and US4 against these types of risks has become more levels stagnated near a two-year low. important than ever. Pensions and savings income have been eroded, cutting spending power. The spreading debt crisisLloyd’s Risk Index 2011
    • 11 2. The prioritisation of ‘talent and skills shortages’ skilled in expanding market share, rather as the number two risk facing businesses, and than a more forensic model for steering one of only two risks which respondents felt businesses through challenging times. talent they were insufficiently prepared for, begs many questions. In a time of business consolidation It may be that ever-expanding markets made it easy for businesses to thrive with and skills and record unemployment, the pool of surplus an existing skill set. available talent should, in theory, be significant. The Index does not give us all the answers And yet, at the very top of organisations, there shortages and there is inevitably a degree of speculation is huge anxiety about the suitability of available about the causes behind this finding. However, staff for the roles required. respondents across all sectors agree this Severe skills shortages, for example, are is a significant and widespread problem. being reported as a growing risk in the North The resulting business risks could include Sea oil fields7, with frequent staff movement everything from poor product development as companies poach staff from each other. to inappropriate risk management strategies. The Australian mining industry, suffering cycles Many sectors are waking up to this risk of interstate poaching, is now running regular and taking action. Some IT companies, for job fairs as far afield as Canada8. Poaching example, are undertaking audits to identify from a dwindling pool of suitable staff is not staff at risk of being poached and targeting a sustainable strategy. packages for retention. But prevention is Concern over talent or skills shortages could just part of the solution and many industries be the result of a number of factors. The are investing in a process to identify and retirement of the ‘baby boomers’ in the West train the talent they need from scratch. is taking a whole tier of well-educated and Parts of the insurance industry, including experienced staff out of the job market. It may Lloyd’s, have started programmes to recruit also be that the booming market trends of the raw talent and train them to ensure an last 20 years have led to an executive level expert and innovative future workforce. thE gERmaNs havE a woRd FoR It – result in a search for the best by the firms ‘FachKRäFtEmaNgEL’ that survive. “These companies survive According to Lloyd’s general representative for by streamlining their processes to ensure Germany, Burkard von Siegfried, the impact of their competitiveness in world markets, the ‘talent crunch’ in Germany is now becoming and qualifications needed at these levels acute; there is even a specific term for it, are increasingly high.” But Germany is also a ‘Fachkräftemangel.’ “The problem is particularly country which traditionally has a strong SME severe in the engineering, medical and IT fields”, sector and, as thousands of owners retire von Siegfried notes, “with their intensive training each year, owner succession problems are and high drop out rates.” As a result, Germany acute. In response, the German government is increasingly seeking foreign expertise. and other stakeholders have started an Economic recessions, he believes, tend to initiative9 to support business transfers.Lloyd’s Risk Index 2011
    • 12 sEctIoN one the top five risks continued thE JapaNEsE EXpERIENcE – KEEpINg problems, “The domestic skill set to manage up wIth a chaNgINg woRLd oRdER mergers and acquisitions, particularly on an Japan’s talent and skills shortages, on the international stage, is very light. As the move other hand, have their roots in a very different by Japanese businesses to invest further into crisis. In the ‘lost decades’ that characterised overseas markets grows, there is increasing its domestic economy from the late 1980s pressure on the number of people available through the 2000s, despite a strong export to recruit to run these businesses.” market, Japan focused on delivering domestic The risk management landscape of Japan is growth. It wasn’t until the impact of ongoing also changing. As more Japanese companies demographic changes – an ageing population become involved in overseas trading or buy and low birth rates – were understood, that this overseas assets, they are having to improve focus began to change. In 2009, the Japanese their understanding of international standards economy contracted by over 6%, with consumer and, in some cases, adopt them. The small prices declining by 1.4% in 2009. In 2010 pool of risk and compliance staff in Japan consumer prices declined by a further 0.7%10. are in high demand as a result. By then, Japan Inc had recognised the need to seek growth internationally. Ferguson also highlights the changing culture of Japanese boardrooms, “Chairmen, In the meantime, the West has moved on in Presidents and Directors have, until recently, terms of entering international markets. Mergers enjoyed a fairly ceremonial existence but as and acquisitions activity has risen considerably the personal liability of directors becomes a and Japan, while well capitalised for this type real issue, they are now under pressure to of expansion, finds itself at a disadvantage . 11 Priority Preparedness improve their skill sets from shareholders As Lloyd’s Japanese representative, 1 Very well prepared 1 Very high asking how their capital is being used to 2 2 Iain Ferguson notes this presents obvious fund international expansion.” 3 3 4 4 5 Very low 5 Not at all prepared Priority Preparedness 1 Very high 1 Very well prepared Priority 2 Preparedness 2 Chart 3 1 1 3 Very high 3 Very well prepared 2 4 2 4 talent and skills shortages – priority and preparedness by regioN 3 Very low 5 3 Not at all prepared 5 4 4 6.8 1.5 9.6 4.7 1.9 11.0 13.5 5 Very low 9.3 5 Not at all prepared 24.1 19.9 31.5 Priority Preparedness 16.2 Priority Preparedness 1 Very high 1 Very well prepared 21.8 2 2 1 Very high 1 Very well prepared Priority asia- north rest Priority Preparedness 3 3 of the 2 2 1 Very h pacific america 4 europe 4 1 Very Priority high 1 Very well prepared Preparedness 2 6.8 1.5 % % 9.6 11.0 5 Very low % 4.7 5 13.5 at all prepared Not 9.3 world 1.9 3 2 1 Very high 3 2 1 Very well prepared 3 24.1 19.9 % 31.5 1.5 9.6 4.7 1.9 4 3 2 4 3 2 4 6.8 16.2 11.0 13.5 9.3 24.1 19.9 31.5 4 3 4 3 5 Very lo 21.8 29.6 27.8 5 Very low 5 5 Not at allNot at all prepared 5 prepared 45.9 29.4 16.2 33.8 33.3 28.7 rest 4 Very low 4 asia- north 21.8 pacific america europe of the 5 Very low 5 Not at all prepared asia- % north % % rest world pacific america4.7 europe of % the % 2.39.6 11.0 % 3.0 10.6 13.5 % 3.5 9.3 1.9 11.6 world 1.9 1.9 24.1 21.8 12.9 19.9 14.5 31.5 16.7 29.6 % 27.8 21.8 45.9 29.4 33.8 33.3 28.7 42.6 16.2 6.8 1.5 9.6 11.0 4.7 13.5 6.8 1.5 9.6 29.6 24.1 27.8 4.7 1.9 19.9 11.0 13.5 9.3 north 45.9 29.4 33.8 rest 33.3 1.5 24.1 28.7 9.6 rest 19.9 16.2 4.7 1.9 31.5 asia- north 6.8 11.0 13.5 9.3c europe europe the 24.1 of 16.2 21.8 4.7the of 19.9 31.5 6.8america pacific 2.3 1.5 america 21.89.6 3.0 % 11.0% 3.5 world world 13.5 6.8 1.5 1.9 1.9 9.3 1.99.6 4. % % 24.1 % 10.6 16.2 11.6 19.9 16.7 % asia- north rest 31.5 11.0 21.8 21.8 12.9 21.8 14.5 asia- % north pacific 42.6 24.1 america europe 19.9 2.3 3.0 16.2 10.6 pacific 3.5 11.6 america % 1.9 1.9 europe 16.2 of the % rest 21.8 12.9 asia- 29.6 14.5 north 16.7 % world 21.8 % 28.7 pacific 30.8 27.8 % america rest 21.8 42.6 % europe of the 21.8 27.8 29.4 45.9 26.3 33.8 35.6 33.3 37.9 39.5 37.0 % world asia- north asia- % north pacific % europe % of the rest % 33.3 euro % asia- america north rest 45.9 pacific 33.8 america asia- north world 29.4 28.7 % of %the % 29.6 27.8 pacific pacific % america america europe 1.9 45.9 29.4 europe of the 33.8 % 33.3 % 28.7 29.6 27.8 21.8 % 12.9 3.0 % 10.6 % 14.5 3.5 % 11.6 % 45.9 1.9 29.4 16.7 30.8 % world 33.8 % 33.3 28.7 world 27.8 26.3 35.6 37.9 39.5 42.6 37.0 2.3 45.93.0 % 29.4 33.8 3.5 33.3 2.3 3.0 3.5 12.9 10.6 1.9 14.5 1.9 11.6 30.8 10.6 21.8 11.6 21.8 27.8 north 26.3 35.6 37.9 21.8 39.5 2.3 rest 12.9 21.8 3.0 37.0 14.5 3.5 16.7 1.9 1.9 10.6 29.6 11.6 27.8 42.6c america 45.9 europe 29.4 21.8 33.8 of the12.9 33.3 21.8 14.5 28.7 16.7 42.6 % world asia- 2.3 north 3.0 3.5 % asia- % north 21.8 12.9 rest10.6 europe 14.5 pacific 21.8 europe america of the % rest pacific asia- america % north % 30.8 % % % europe world of the 26.3 35.6 37.9 39.5 pacific 37.0 america % % % asia- % northworld 2.3 3.0 27.8 3.5 26.3 pacific 35.6 1.9america39.5 37.9 1.9% euro 30.8 10.6 11.639.5 % 30.8 % % 21.8 12.9 27.8 26.3 35.6 14.5 37.9 16.7 37.0 21.8 27.8 26.3 35.6 37.9 39.5 30.8 37.0 42.6 27.8 26.3 35.6 37.9 39.5 asia- north rest pacific america europe of the % % % world % Lloyd’s Risk Index 2011 30.8 27.8 26.3 35.6 37.9 39.5 37.0
    • 13 3. In 2009 reputational risk was ranked ninth, Certain business practices can themselves in 2011 it comes third. The intervening two directly increase the likelihood of reputational years have seen the unfolding of a reputational risk. Operating in new territories without a Reputational crisis in many countries. While politicians, bankers and ratings agencies have all come thorough understanding of local geopolitical tensions can carry significant reputational Risk under severe scrutiny, business has not risk, as well as operational uncertainty and escaped criticism either. From recalls by car higher security costs, as many international manufacturers in the US, Europe and China companies operating in Nigeria13 have to the Deepwater Horizon disaster’s impact discovered. on BP market value, to the drop in the price The Index shows that businesses believe of Research In Motion, makers of Blackberry they are, if anything, actually over-prepared shares, awareness of the impact of reputation to deal with reputational risk, scoring the on the bottom line is growing. preparedness at 6.6 against a priority score A 2010 study12 of the world’s 1,000 largest of 5.8. At a time when the reputation of companies found 80% of companies lose more companies is becoming of greater importance than 20% of their value at least once in a 5-year to consumers, and therefore to shareholders, period because of a major reputational event. it will be interesting to see if events confirm Business fails to protect itself from reputational this degree of optimism. damage at its peril. 4. The number two priority given overall to This crisis has proved deeply destabilising. currency fluctuation in our 2009 survey was In Europe and the US, the plummeting virtually universal geographically, in 2011 it values of the euro and the dollar caused currency was included in the top five risks of all regions apart from North America. Export-led countries a flight to the Swiss franc, forcing the Swiss National Bank to peg its value to that of Fluctuation such as India and China, particularly in industries the euro in September 2011. The write heavily reliant on importing raw materials and down of Greek debt in the Autumn of exporting finished products, had every reason 2011 was compounded by the crisis in Italy to fear exchange rate fluctuation as a brake which saw yields on one-year government on sustainability and growth. bonds break the 8% mark in November. The Prime Ministers of both countries In the face of the subsequent slowdown in became casualities of the crisis and 2011 orders from Europe and North America, China is ends with speculation that the eurozone increasingly investing in its own infrastructure may not survive in its current form. and encouraging greater domestic consumer spending. It now has the world’s highest savings Given the volatility of global markets, low rate and unlocking some of the more than yields in safe havens appear increasingly $350bn14 current account surplus will encourage likely to be the investments of choice for Chinese manufacturers to prioritise supplying governments and corporate investors, for domestic markets. Reducing this domestic the foreseeable future. Investment yields savings surplus means a corresponding will be increasingly inadequate to subsidise reduction in buying foreign government debt; unsustainable businesses. the implications for the exchange rates of other countries could be significant, including higher interest rates on national bonds globally. Interestingly, however, China demonstrated little enthusiasm for buying European debt during the 2011 crisis in the eurozone.Lloyd’s Risk Index 2011
    • 14 sEctIoN onethe top five riskscontinued 5. The global financial crisis has provided a In the US, the Dodd-Frank (Wall Street major legislative response. For the banking Reform and Consumer Protection) Act, industry, the capital requirements of Basel II introduced in July 2010 has overhauled changing have been added to by the provisions of Basel III due for full implementation in 2019. the previous agency oversight system for financial services, including the creation legislation At an international level, G20 leaders are of a Financial Stability Oversight Council taking steps to give the Financial Stability and a Federal Insurance Office to oversee Board greater power and strengthen its financial institutions. In addition to this monitoring function to ensure Basel III and layer of supervision, accountability and subsequent requirements are implemented reporting standards have been raised. consistently across all countries. In the East, too, emerging economies are The requirements of Solvency II, aimed at tackling their problems with more regulation. the European insurance industry, which may At the start of 2011, China announced the well have played a part in increasing risk acceleration of plans to control pollution awareness in Europe, are currently likely to caused by heavy metals16. Vice-Environment be fully implemented in 2014. Switzerland Protection Minister, Li Ganjie, has warned he and Japan are being assessed for equivalence will shut down the operations of multinational alongside Bermuda. companies that try to conceal their creation of environmental hazards. In April 2011, Despite the G20 drive for global parity of much the China Ministry of Transportation issued financial regulation, there is a move towards additional regulations for ship owners in regulatory protectionism; with different Chinese waters covering water, oil waste countries keen to promote their own regime as and sludge disposal. more business friendly than those of potential competitors. Businesses in the City of London, China’s growing resolve to tackle its status for example, have pointed out the economic as the world’s biggest polluter presents risks of disproportionate European regulation15, opportunities for a range of waste and driving financial services to countries with other environmental businesses. It also lower capital requirements and lighter corporate serves as a warning that business practices tax regimes. which worsen China’s environmental health are less likely to be tolerated in the future.Lloyd’s Risk Index 2011
    • 15 02 mINd thE (REaLIty) gap Political, crime and security risks 16 Environmental risks – a balancing act for business 19 The ‘selective invisibility’ of natural hazards 20Lloyd’s Risk Index 2011
    • 16 sEctIoN twomINd thE (REaLIty) gapmINd thE (REaLIty) gapRisks from three of the five categories do notfeature at all in the Index top ten; these are‘political, crime and security’, ‘environmentaland health’ and ‘natural hazard’. Indeed, naturalhazard risks are exclusively found in the bottomten of the Index.In focusing so much on the most visibleand regularly encountered types of risk, arebusinesses making themselves more vulnerableto statistically rarer but, potentially, moredangerous risk? Some of these low probability,high impact events are the ones which actuallyhave the power to devastate businesses, buttheir lower frequency means businesses maybe less likely to focus on them.poLItIcaL, cRImE aNd sEcuRIty RIsKsChart 4political, crime and security risk priority and preparedness scoresOverall 5.4 6.5Cyber attacks (malicious) 5.3 6.0Theft of assets/intellectual property 5.2 6.1Fraud and corruption 5.2 6.3Cyber risk (non-malicious) 5.1 6.2Strikes/industrial action 4.2 5.8Piracy 3.9 5.6Terrorism 3.9 5.0Riots and civil commotion 3.7 5.1Expropriation of assets 3.4 5.2 PriorityAbrupt regime change 3.3 4.8 PreparednessScore – out of 10 0 1 2 3 4 5 6 7Lloyd’s Risk Index 2011
    • 17uNREst acRoss thE gLobE Other risks are also contributing to the likelihoodThe 2009 survey put the risk of abrupt regime of unrest. Sovereign debt (which came in fairlychange at 40 out of 41, riots and civil commotion low down the Index at number 25) leads directlyat 38 and terrorism at 31. The Arab Spring to volatile markets and low investment yields,of 2011, which ousted regimes in Tunisia, while civil unrest leads to business continuityEgypt and Libya and created fuelled growing disruption and property damage. The Associationopposition to regimes in Syria, Yemen, Bahrain of British Insurers, for example, estimate thatand other Middle Eastern states is changing the claims for the UK riots will top £200m, withthe political landscape of the region and has bills for compensation adding at least anotherhelped drive oil prices upwards temporarily. £133m to that total17.Yet the Index shows the perception of the The growing sovereign debt crises of manyrisk of abrupt regime change has, if anything, European states will take years to fully resolvedropped slightly down the list. – continued austerity measures, which haveThe deepening financial crisis in the eurozone already demonstrably led to unrest, seem likely.has seen public protests and strikes in Greece, Despite this, riots and civil commotion only justSpain and Italy. Although not directly attributed escape the bottom ten of the Index, while strikesto the economic downturn, in the UK looting and and industrial action come in at number 30 andrioting erupted in major cities during the summer. sovereign debt at 25. More than ever, businesses need effective plans in place to protect their plant, infrastructure, property, staff and supply chains from the fallout of political, social and economic threat.Chart 5political risk priority and preparedness scores by industry global energy and financial other it and manufacturing professional healthcare, natural services industries technology services pharma and resources biotech 5.4 6.6 6.0 5.6 5.3 5.2 4.4 3.2Priority 6.5 7.4 6.5 6.4 6.4 6.6 6.3 6.8Preparedness Score – out of 10Lloyd’s Risk Index 2011
    • 18 sEctIoN twomind the (reality) gapcontinued FacINg up to thE cybER thREat The UK story may be typical of the problem. While many types of risk may be industry or In 2010, a survey indicated that 90% of large regionally specific, cyber risk is universal. Yet its businesses reported at least one cyber security ranking in the overall Index at only 12 (malicious incident in the previous two years19. Almost attacks) and 19 (non-malicious) appears relatively half of these businesses had increased their low given the frequency and potential impact expenditure on information security, yet the of the risk. It is interesting, however, that this number of breaches had more than doubled. year the risk of malicious attacks did make it Given the roll call of recent victims, even large into North America’s top five risks. businesses need to ask if they really understand The evidence of the last two years is the nature of the risk to which they are exposed. incontrovertible. So far, 2011 has seen the Are they, in fact, spending money on the right hacking of state networks from India to Brazil. things? For smaller businesses the associated For businesses, the incidence and frequency of costs of a data breach could put their very data breaches have been even more unrelenting; sustainability at risk. Recognising this, in March Nintendo, CityGroup, Honda, Toshiba, Pfizer, 2011 Lloyd’s insurer Kiln and broker Lockton Sony Playstation, Sega, Nokia, the Hong Kong joined forces to provide cyber insurance to Stock Exchange, Lockheed Martin and Google small and medium-sized online retailers. are just some of the known victims. Even the In a world where comparison sites now exist International Monetary Fund and Wiki-Leaks to help criminals select data theft software, fell victim to hackers. cyber security threats have become ubiquitous. The business costs of cyber breaches, whether Technical solutions are needed that evolve malicious or otherwise, are mounting. Research more swiftly, together with improved reporting published at the start of 2011 estimated global of breaches to help quantify the risk more cyber crime is now costing businesses $114bn accurately. In the interim, businesses should a year, $96bn of it in the US alone18. consider making the need to protect themselves and their customers a much greater priority. table 3. political, crime and security risks, 2011 ranking versus 2009* ranking political, crime and security Risk 2011 RaNK 2009 Ranking cybER attacKs (maLIcIous) 12 Cyber attacks rated 20 thEFt oF assEts/ INtELLEctuaL pRopERty 16 18 FRaud aNd coRRuptIoN 17 15 cybER RIsK (NoN-maLIcIous) 19 Cyber attacks rated 20 stRIKEs aNd INdustRIaL actIoN 31 28 pIRacy 34 27 tERRoRIsm 36 31 RIots aNd cIvIL commotIoN 39 38 EXpRopRIatIoN oF assEts 43 35 abRupt REgImE chaNgE 45 40 * In 2009 there were 41 risks whereas in 2011 there were 50.Lloyd’s Risk Index 2011
    • 19Chart 6 ENvIRoNmENtaL RIsKs – a baLaNcINg Litigation and business: transatlantic trends act FoR busINEss (2008)20 shows, there is a growing risk of ‘forumEnvironmental risk priority and The last two years have provided ample shopping’, where litigants choose the jurisdictionpreparedness scores by industry evidence of the impact of environmental and in which they launch their claim. Given that the related health risks. The contamination of the risk of mass litigation varies across countries, Priority Preparedness Alabama and Louisiana coastlines caused by businesses need to be fully aware of theGLOBAL the Deepwater Horizon disaster in 2010 is rules and procedures governing class actions estimated to have cost BP up to $20bn in wherever they operate. Insurance for businesses oil-spill fines. An explosion at the Japanese and reinsurance for insurers is likely to play a 5.0 6.1 Fukushima nuclear plant in 2011 resulted in much greater role as this trend develops and the evacuation of over 100,000 people and a it becomes harder to predict where litigation 20km exclusion zone. These examples could may arise.manufacturing hardly be starker and yet businesses barely New geographical frontiers of corporate liability registered a change in the priority ranking of are also opening up with the development, ‘pollution and environmental liability’. That for example, of new, potentially riskier, means of their preparedness scores were greater than 5.6 6.5 energy production such as shale gas extraction their priority ranking may indicate a level of and deep water drilling. The Lloyd’s 2011 report, complacency around environmental risk. Drilling in extreme environments21, highlights Aside from clean-up costs and compensation the emerging risks involved and ways in which for affected communities, one of the emerging these energy industry and insurers can workenergy and natural resources risks for Europe and other countries when it together to reduce the risks in operating in comes to environmental damage is the potential harsh environments, such as deep water and for US-style class actions. As the Lloyd’s report, the Arctic. 5.6 7.3financial services table 4. environmental risks, 2011 ranking versus 2009* ranking 5.2 5.8 Environmental Risk 2011 Ranking 2009 Ranking poLLutIoN/ENvIRoNmENtaL LIabILIty 24 29 INdustRIaL/woRKpLacE accIdENt 27 25other industries dEmogRaphIc shIFt (Eg agEINg popuLatIoN, youth EmIgRatIoN) 30 Not available cLImatE chaNgE 32 33 paNdEmIc 33 34 5.0 6.0 watER scaRcIty 35 Not available uRbaNIsatIoN 37 Not available popuLatIoN gRowth 38 Not availablehealthcare, pharma and biotech Food sEcuRIty 40 Not available haRmFuL EFFEcts oF NEw tEchNoLogy (Eg NaNotEchNoLogy, EmF) 41 Not available * In 2009 there were 41 risks whereas in 2011 there were 50. 4.7 7.3professional services 4.4 5.8IT and technology 4.1 5.3Score – out of 10Lloyd’s Risk Index 2011
    • 20 SECTION two 21mind the (reality) gapcontinuedTHE SELECTIVE INVISIBILITY Chart 7OF NATURAL HAZARDS 2010 and 2011 global natural hazardsIn the two years since Lloyd’s last undertookits risk survey, and despite all objective evidenceto the contrary, natural hazards still remain atthe bottom of the Index. 2011 20112010 saw major earthquakes strike Haiti, Chile, 2010China and Indonesia. It saw devastating floodsin Pakistan and Australia, fatal heatwaves and 2010forest fires in Russia and the eruption of Iceland’sEyjafjalljökull volcano, grounding flights acrossNorthern Europe and North America. 2011proved no better, with floods in Brazil, Sri Lankaand Australia, earthquakes in New Zealand,Japan and Turkey and tornadoes and hurricanesin North America.Even before the 2011 hurricane season ended,the amount paid out by insurers for the firstsix months of 2011 from natural catastrophesexceeded the total for the whole of 2010. It CANADAseems likely that 2011 will be the second most Slave Lake ICELANDexpensive year ever for the insurance industry22. Wildfires Volcano RUSSIA Heatwave, Forest Fires CHINA Earthquake US EUROPE ¥ Hurricane Windstorm US * Irene Xynthia TURKEY Tornadoes US ^ Earthquake BURMA JAPAN Flooding Earthquake Earthquake, US # Tsunami Wildfires HAITI THAILAND Earthquake PAKISTAN Floods GULF OF Floods MEXICO MEXICO Earthquake Tropical HORN Storm Lee OF AFRICA Droughts INDONESIA PAKISTAN Earthquake Earthquake & Tsunami SRI LANKA Floods BRAZIL Floods, Mudslides AUSTRALIA Floods NEW ZEALAND Earthquake AUSTRALIA Floods, CHILE Cyclone Yasi Earthquake NEW ZEALAND Earthquake * Alabama, Mississippi, Missouri # Texas ^ Mississippi ¥ Belgium, France, Germany, Portugal, SpainLloyd’s Risk Index 2011 Lloyd’s Risk Index 2011
    • 22 sEctIoN twomind the (reality) gapcontinued When it comes to natural hazards, what happens prosecuted for manslaughter by the Italian in Japan doesn’t stay in Japan. Globalisation and state for failing to provide sufficient warning of extended supply chains mean that a Japanese the severity of the L’Aquila earthquake in 200923. tsunami can close a car factory in the UK – The final verdict will be awaited keenly by both a fact reflected by the launch of new nuclear the scientific community and by casualty and business interruption cover by Lloyd’s broker property insurers. Willis after Fukushima. The interconnectedness It may be that the Western businesses approach of global trade means flooding, drought, to natural hazard risk still remains ‘out of sight, windstorms and earthquakes have an immediate out of mind’. As the impacts of climate change effect on supply chains as well as longer-tail accumulate, they may be failing to grasp the impacts on a country’s debt infrastructure, very real threats that natural catastrophes pose import and export ability and even its political to business continuity. In the ongoing debate stability. Yet the Index shows Western business over whether climate change is man made or leaders continue to give the risks these hazards cyclical, businesses, planners and governments present low weightings. may be in danger of losing sight of the urgent There is, perhaps, much greater scope for a need to prioritise mitigating against the effects more proactive partnership between science of natural hazards. and planning models in managing the risks of natural hazards. In 2011, Italian scientists were Chart 8 Natural hazard risks priority and preparedness scores by industry global 4.3 5.5 energy and natural resources 5.2 6.2 financial services 4.7 5.4 other industries 4.6 5.7 manufacturing 4.1 5.4 it and technology 3.5 4.5 professional services 3.3 5.1 Priority healthcare, pharma and biotech 3.1 5.9 Preparedness Score – out of 10 0 1 2 3 4 5 6 7 Chart 9 Natural hazards risk priority and preparedness scores by region REST OF EUROPE the world GLOBAL 3.4 4.7 4.3 EUROPE NORTH NORTH 4.7 ASIA- REST OF the world GLOBAL 4.9 5.5 america america pacific 4.1 6.5 5.4 ASIA- pacific 5.8 Priority Preparedness Score – out of 10Lloyd’s Risk Index 2011
    • 23 03 RIsK awaRENEss RIsEs IN thE East An escalated appreciation of risk 24Lloyd’s Risk Index 2011
    • 24 section threeRIsK awaRENEssRIsEs IN thE East aN EscaLatEd appREcIatIoN oF RIsK ‘Loss of customers/cancelled orders’ is the Business leaders in the Asia-Pacific region have number one risk for European and North American significantly raised their assessment of the business leaders and the score they give it is seriousness of all five categories of risk since 6.0 and 6.2 respectively. While the same risk 2009. Business risks rise from a priority score ranks only fourth for Asia-Pacific respondents, of 6.5 in 2009 to 7.7 today, economic risks from they give it a score of 6.3. Similarly, while 6.6 to 7.3, political risk from 5.0 to 6.1 and natural ‘reputational risk’ comes in as the second hazards from 4.3 to 5.4. The sharpest rise of all highest priority for North America it is given has been the perception of environmental risks, a score of 5.9. Despite this risk being placed from 4.7 in 2009 to 6.0 today. fifth by Asia-Pacific respondents, they give it a higher score of 6.2. While these rises tell a clear story of a region increasingly recognising risk, the Index findings also show a significant disparity between the scores given to top risks by European and North American respondents and those given by respondents in the Asia-Pacific region. Chart 10 top 5 priority and preparedness scores – asia-pacific Talent and skills shortages 7.1 6.1 Currency fluctuation 6.5 6.2 Inflation 6.4 5.9 Loss of customers/cancelled orders 6.3 6.7 Priority Reputational risk 6.2 7.1 Preparedness Score – out of 10 0 1 2 3 4 5 6 7 8 Chart 11 comparison of risk category scores by region global north europe asia- rest of america pacific the world 7.3 7.1 7.0 7.7 7.9 business 7.1 6.9 6.9 7.3 7.3 7.2 7.2 7.2 7.3 7.3 economic 6.5 6.5 6.4 6.8 6.3 5.4 4.8 5.0 6.1 6.9 political 6.5 6.7 6.2 6.8 6.4 5.0 4.5 4.5 6.0 5.2 environmental 6.1 6.3 5.9 6.6 5.1 Priority Preparedness 4.3 4.1 3.4 5.4 4.7 natural 5.5 6.5 4.7 5.8 4.9 Score – out of 10Lloyd’s Risk Index 2011
    • 25Concern about talent and skills shortages, inparticular, is considerably higher in Asia-Pacificthan in the other regions of the world. 70% ofAsia-Pacific respondents gave it a very high orhigh priority, against 42% for Europe, 45% forNorth America and 60% for the rest of the world.With this degree of priority, it is interesting thatAsia-Pacific’s score for being ‘very’ or ‘well’prepared against this risk is only 48%. This is thehighest gap between priority and preparednessfor this risk of any of the world’s regions.Having experienced a devastating year ofnatural catastrophes, it’s not surprising thatthe Asia-Pacific region gives the risk category‘natural hazards’ the highest priority of allother world regions, with a score of 5.4. Whatis, perhaps, surprising is that respondents stillbelieve they are slightly over-prepared for therisk at 5.8. Given that, for example, the claimsmade to the non-life insurance industry fordamage caused by the Japanese earthquakeand tsunami were $30bn and the total economicloss to the region has been estimated at nearer$100bn24, the belief in near-parity betweenrisk priority and preparedness may be harderto justify.Chart 12overall risk categories priority scores 2011 versus 2009 – asia-pacific Business economic political environmental natural 7.7 7.3 6.1 6.0 5.42011 6.5 6.62009 5.0 4.7 4.3 Score – out of 10Lloyd’s Risk Index 2011
    • 26 conclusioncoNcLusIoN By any standards, the two year period Does the location of ‘insurable’ risks at between 2009 and 2011 has been more than the bottom of the Index suggest that the usually eventful. Exceptionally frequent and insurance industry is doing exactly what it costly natural disasters, waves of political aims to do – allowing the transfer of risks Is it credible that so many change across North Africa and the Middle away from companies? If so, does this mean boards across the world East, and an escalating sovereign debt crisis in that insurers can congratulate themselves are adequately prepared Europe have created new economic, political, on a job well done? environmental and social uncertainties. for climate change, We believe this is premature. The wide That the risk priorities of business leaders take-up – in the West at least – of insurance another volcanic ash cloud across the globe have changed is not surprising. to manage risks such as floods or earthquakes or a major earthquake? What is more surprising is the general level clearly has a positive impact on boards’ of confidence, with some notable exceptions, levels of preparedness. But neither insurers that respondents show in their ability to deal nor their clients can afford to be complacent with these risks. Whatever the trends or partial about the risks presented by low probability explanation, we come back to the fact that in 48 – high impact events. Is it credible that so out of the 50 risks in the Index most respondents many boards across the world are adequately believe their preparedness for a particular risk prepared for climate change, another outweighed its sense of priority. volcanic ash cloud or a major earthquake? As a major international insurer we have to ask: The terrible succession of events in Japan do people feel better prepared, at least in part, this year illustrates that, while insurance can because they have the option of insurance? help rebuild communities and infrastructure, it cannot stop our planet being battered by It is interesting that levels of perceived natural disasters. Nor, importantly, can it preparedness increase in those areas where cover every eventuality. insurance is most readily available, such as natural hazards, and shrink in relation to areas After the unfolding events of the last two where it is not, such as in preventing the loss years, businesses need to give much greater of customers, eradicating sovereign debt or priority to planning carefully for the risks solving talent and skills shortages. they cannot prevent, as well as being realistic about those they can.Lloyd’s Risk Index 2011
    • 27appENdIXaNNEX 1:2009 RIsKs 2011 RIsKs> Cost and availability of credit > Loss of customers/Cancelled orders> Currency fluctuation > Talent and skills shortages> Insolvency risk (including succession risk)> Loss of customers > Reputational risk> Major asset price volatility > Currency fluctuation> Cancelled orders > Changing legislation> Risk of excessively strict regulation > Cost and availability of credit> Corporate liability > Price of material inputs> Reputational risk > Inflation> Project delivery risk > Corporate liability> Abrupt interest rate change > Excessively strict regulation> Risk of poor/Incomplete regulation > Rapid technological changes> Increasing protectionism > Cyber attacks (malicious)> Failed investment > High taxation> Fraud and corruption > Failed investment> Information security breach > Major asset price volatility> Price of material inputs > Theft of assets/Intellectual Property> Theft of assets/Intellectual property > Fraud and corruption> Rapid technological change > Interest rate change> Cyber attacks > Cyber risks (non-malicious)> Workforce health > Poor/Incomplete regulation> Talent and skills shortages > Critical infrastructure failure> Supply chain failure > Government spending cuts> Succession risk > Supply chain failure> Industrial/Workplace accident > Pollution/Environmental liability> Energy security > Sovereign debt> Piracy > Increased protectionism> Strikes > Industrial/Workplace accident> Pollution (caused by business) > Energy security> Flooding > Insolvency risk> Terrorism > Demographic shift (eg ageing population,> Currency inconvertibility youth emigration)> Climate change (impact on business) > Strikes and industrial action> Pandemic > Climate change> Expropriation of assets > Pandemic> Earthquake > Piracy> Drought > Water scarcity> Riots and civil commotion > Terrorism> Windstorm (eg hurricane or typhoon) > Urbanisation> Abrupt regime change > Population growth> Wildlife > Riots and civil commotion > Food security > Harmful effects of new technology > Flooding > Expropriation of assets > Earthquake (including tsunami) > Abrupt regime change > Windstorm (eg hurricane, cyclone, typhoon) > Drought > Threats to biodiversity > Impact of space weather (eg solar flares) > Volcanic eruption (including ash)Lloyd’s Risk Index 2011
    • 28 appendixappendixcontinueddIREctLy compaRabLE RIsKs NEw RIsKs FoR 2011 mEthodoLogy2009 aNd 2011 > Changing legislation The Lloyd’s Risk Index is based on results of a> Abrupt regime change > Critical infrastructure failure survey of 500 board level executives, carried> Corporate liability > Demographic shift out by the EIU in August 2011. Respondents> Cost and availability of credit (eg ageing population, youth emigration) rated, on a scale of one to five, how much of> Currency fluctuation > Food security a priority each of the 50 risks will be to their> Drought > Government spending cuts business for the next year in the region they> Energy security > Harmful effects of new technology are based. On a similar scale they rated how> Excessively strict regulation (eg nanotechnology, EMF) prepared they expect their organisation will> Expropriation of assets > High taxation be to deal with that risk. Responses were> Failed investment > Impact of space weather (eg solar flares) converted to a one to ten index and averaged> Flooding > Inflation to calculate the priority and preparedness> Fraud and corruption > Population growth scores. The 2009 risk survey contained 41 risks> Increasing protectionism > Sovereign debt and took place in March 2009. It surveyed 570> Industrial/Workplace accident > Threats to biodiversity and conservation board level executives spread across major> Insolvency risk affecting our operations regions of the world.> Major asset price volatility > Urbanisation> Pandemic > Volcanic eruption (including ash)> Piracy > Water scarcity> Poor/Incomplete regulation> Price of material inputs> Rapid technological change RIsKs INcLudEd IN 2009 suRvEy> Reputational risk but REmovEd FoR 2011 suRvEy> Riots and civil commotion> Supply chain failure > Currency inconvertibility> Terrorism > Information security breach> Theft of assets/Intellectual property > Project delivery risk> Windstorm (eg hurricane, cyclone, > Wildlife typhoon) > Workforce healthtable 5. Risks which have changed for the 2011 survey2009 risk definitions 2011 risk definitionsAbrupt interest rate change Interest rate changeCancelled orders Loss of customers/cancelled orders (amalgamated)Climate change (impact on business) Climate changeCyber attacks Cyber attacks (malicious) Cyber risk (non-malicious)Earthquake Earthquake (including tsunami)Loss of customers Loss of customers/cancelled orders (amalgamated)Pollution (caused by business) Pollution/environmental liabilityStrikes Strikes and industrial actionSuccession risk Talent and skills shortages, including succession risk (amalgamated)Talent and skills shortage Talent and skills shortages, including succession risk (amalgamated)Lloyd’s Risk Index 2011
    • 29aNNEX 2:Chart 13top 50 priority risk scores in 2011 – asia-pacificRisk1 Talent and skills shortage (including succession risk) 7.112 Currency fluctuation 6.523 Inflation 6.434 Loss of customers/cancelled orders 6.325 Reputational risk 6.246 Fraud and corruption 6.107 Changing legislation 5.988 Interest rate change 5.959 Corporate liability 5.9310 Excessively strict regulation 5.8811 Failed investment 5.8712 Price of material inputs 5.8613 Cost and availability of credit 5.7414 Poor/incomplete regulation 5.7315 Rapid technological changes 5.6216 Theft of assets/intellectual property 5.5517 High taxation 5.5518 Critical infrastructure failure 5.4919 Pollution/environmental liability 5.4720 Cyber attacks (malicious) 5.4521 Energy security 5.4522 Major asset price volatility 5.4223 Industrial/workplace accident 5.3624 Supply chain failure 5.3025 Demographic shift (eg ageing population, youth emigration) 5.2326 Sovereign debt 5.2327 Climate change 5.1728 Cyber risk (non-malicious) 5.1129 Increased protectionism 5.1130 Water scarcity 5.0631 Pandemic 5.0032 Urbanisation 5.0033 Piracy 4.9834 Insolvency risk 4.9835 Terrorism 4.8936 Government spending cuts 4.8937 Food security 4.7538 Flooding 4.7239 Earthquake (including tsunami) 4.7240 Population growth 4.6941 Strikes and industrial action 4.5342 Harmful effects of new technology (eg nanotechnology, EMF) 4.5343 Abrupt regime change 4.4544 Riots and civil commotion 4.4345 Expropriation of assets 4.2846 Drought 4.0647 Windstorm (eg hurricane, cyclone, typhoon) 3.9048 Threats to biodiversity and conservation affecting our operations 3.5949 Impact of space weather (eg solar flares) 3.5550 Volcanic eruption (including ash) 3.26Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 30 appendixappendixcontinuedChart 14top 50 priority risk scores in 2011 – europeRisk1 Loss of customers/cancelled orders 6.002 Talent and skills shortage (including succession risk) 5.663 Currency fluctuation 5.534 Cost and availability of credit 5.345 Changing legislation 5.336 High taxation 5.207 Reputational risk 5.188 Failed investment 5.129 Excessively strict regulation 5.1210 Corporate liability 5.0611 Inflation 5.0112 Price of material inputs 4.9913 Major asset price volatility 4.9714 Cyber attacks (malicious) 4.9415 Rapid technological changes 4.9416 Government spending cuts 4.9017 Sovereign debt 4.8818 Cyber risk (non-malicious) 4.8219 Theft of assets/intellectual property 4.8020 Fraud and corruption 4.7721 Interest rate change 4.6922 Critical infrastructure failure 4.5723 Poor/incomplete regulation 4.5624 Insolvency risk 4.5625 Supply chain failure 4.5426 Pollution/environmental liability 4.3227 Strikes and industrial action 4.3228 Industrial/workplace accident 4.2629 Increased protectionism 4.2230 Energy security 4.1231 Demographic shift (eg ageing population, youth emigration) 3.9532 Climate change 3.7333 Pandemic 3.6834 Piracy 3.5535 Riots and civil commotion 3.4536 Urbanisation 3.4537 Terrorism 3.4038 Water scarcity 3.2839 Population growth 3.1640 Expropriation of assets 3.1341 Harmful effects of new technology (eg nanotechnology, EMF) 3.0642 Abrupt regime change 3.0143 Food security 2.9944 Flooding 2.9145 Earthquake (including tsunami) 2.5946 Windstorm (eg hurricane, cyclone, typhoon) 2.5747 Threats to biodiversity and conservation affecting our operations 2.4948 Drought 2.3849 Volcanic eruption (including ash) 2.2750 Impact of space weather (eg solar flares) 2.24Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 31Chart 15top 50 priority risk scores in 2011 – Rest of the worldRisk1 Talent and skills shortage (including succession risk) 6.942 Fraud and corruption 6.183 Loss of customers/cancelled orders 6.164 Currency fluctuation 6.115 Reputational risk 6.116 Price of material inputs 5.757 Cost and availability of credit 5.568 Inflation 5.529 Failed investment 5.5110 Rapid technological changes 5.4611 Corporate liability 5.4212 Critical infrastructure failure 5.4213 Changing legislation 5.3714 Excessively strict regulation 5.3715 Supply chain failure 5.2816 Major asset price volatility 5.2317 Poor/incomplete regulation 5.1418 Energy security 5.0919 Cyber risk (non-malicious) 5.0520 High taxation 4.9521 Theft of assets/intellectual property 4.9122 Increased protectionism 4.9023 Cyber attacks (malicious) 4.8124 Interest rate change 4.8125 Pollution/environmental liability 4.8126 Industrial/workplace accident 4.7627 Riots and civil commotion 4.7228 Water scarcity 4.5329 Urbanisation 4.3830 Climate change 4.3331 Strikes and industrial action 4.2532 Insolvency risk 4.2133 Government spending cuts 4.2134 Food security 4.1035 Demographic shift (eg ageing population, youth emigration) 4.1036 Population growth 4.0137 Terrorism 3.9838 Pandemic 3.9639 Flooding 3.6140 Expropriation of assets 3.4441 Sovereign debt 3.4342 Harmful effects of new technology (eg nanotechnology, EMF) 3.3743 Piracy 3.3544 Abrupt regime change 3.3045 Earthquake (inc. tsunami) 3.2446 Drought 3.1147 Threats to biodiversity and conservation affecting our operations 2.5948 Windstorm (eg hurricane, cyclone, typhoon) 2.1349 Volcanic eruption (including ash) 1.9450 Impact of space weather (eg solar flares) 1.90Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 32 risk index 2011appendixcontinuedChart 16top 50 priority risk scores in 2011 – north americaRisk1 Loss of customers/cancelled orders 6.182 Reputational risk 5.943 Changing legislation 5.714 Cyber attacks (malicious) 5.635 Price of material inputs 5.546 Talent and skills shortage (including succession risk) 5.517 Rapid technological changes 5.468 Cost and availability of credit 5.359 Corporate liability 5.3510 Theft of assets/intellectual property 5.3411 Major asset price volatility 5.3312 Cyber risk (non-malicious) 5.3013 Excessively strict regulation 5.2214 Government spending cuts 5.2215 High taxation 5.1316 Inflation 5.0917 Poor/incomplete regulation 4.9318 Interest rate change 4.8319 Currency fluctuation 4.7020 Supply chain failure 4.6721 Failed investment 4.6722 Critical infrastructure failure 4.5923 Increased protectionism 4.5424 Pollution/environmental liability 4.4225 Fraud and corruption 4.4126 Demographic shift (eg ageing population, youth emigration) 4.4027 Sovereign debt 4.3128 Industrial/workplace accident 4.2529 Insolvency risk 3.9930 Energy security 3.9331 Strikes and industrial action 3.8232 Population growth 3.6933 Windstorm (eg hurricane, cyclone, typhoon) 3.6334 Piracy 3.6135 Pandemic 3.5636 Terrorism 3.5637 Climate change 3.5338 Harmful effects of new technology (eg nanotechnology, EMF) 3.5239 Water scarcity 3.4340 Flooding 3.3741 Food security 3.2342 Urbanisation 3.2143 Earthquake (including tsunami) 2.9944 Drought 2.9345 Riots and civil commotion 2.9146 Expropriation of assets 2.8347 Threats to biodiversity and conservation affecting our operations 2.7048 Impact of space weather (eg solar flares) 2.5749 Abrupt regime change 2.5750 Volcanic eruption (including ash) 1.95Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 33Chart 17top 50 preparedness scores in 2011 – asia-pacificRisk1 Reputational risk 7.062 Corporate liability 6.893 Industrial/workplace accident 6.734 Loss of customers/cancelled orders 6.675 Fraud and corruption 6.606 Cost and availability of credit 6.487 Insolvency risk 6.488 Theft of assets/intellectual property 6.459 Failed investment 6.3510 Rapid technological changes 6.3511 Pollution/environmental liability 6.3512 Supply chain failure 6.3113 Cyber attacks (malicious) 6.2814 Piracy 6.2615 Cyber risk (non-malicious) 6.2316 Critical infrastructure failure 6.2217 Currency fluctuation 6.1518 Energy security 6.0919 Talent and skills shortage (including succession risk) 6.0920 Demographic shift (eg ageing population, youth emigration) 6.0721 Interest rate change 6.0522 Increased protectionism 6.0023 High taxation 6.0024 Strikes and industrial action 6.0025 Government spending cuts 5.9826 Poor/incomplete regulation 5.9127 Inflation 5.9028 Major asset price volatility 5.8629 Population growth 5.8130 Excessively strict regulation 5.7631 Price of material inputs 5.7632 Urbanisation 5.7333 Changing legislation 5.7034 Expropriation of assets 5.7035 Sovereign debt 5.6836 Terrorism 5.6637 Pandemic 5.5738 Climate change 5.5139 Abrupt regime change 5.5140 Water scarcity 5.4741 Food security 5.3842 Riots and civil commotion 5.3843 Flooding 5.3244 Earthquake (including tsunami) 5.1945 Harmful effects of new technology (eg nanotechnology, EMF) 5.1946 Windstorm (eg hurricane, cyclone, typhoon) 4.7447 Drought 4.7048 Threats to biodiversity and conservation affecting our operations 4.6249 Volcanic eruption (including ash) 4.3650 Impact of space weather (eg solar flares) 4.34Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 34 risk index 2011appendixcontinuedChart 18top 50 preparedness scores in 2011 – europeRisk1 Reputational risk 6.262 Corporate liability 6.173 Cost and availability of credit 6.134 Loss of customers/cancelled orders 6.115 Cyber risk (non-malicious) 6.106 Insolvency risk 6.097 Fraud and corruption 5.948 Industrial/workplace accident 5.909 Cyber attacks (malicious) 5.9010 Failed investment 5.8611 Currency fluctuation 5.8312 Talent and skills shortage (including succession risk) 5.8113 Theft of assets/intellectual property 5.8114 Rapid technological changes 5.8015 Supply chain failure 5.8016 Interest rate change 5.7517 Critical infrastructure failure 5.6718 Energy security 5.5419 Pollution/environmental liability 5.5420 Strikes and industrial action 5.5221 Price of material inputs 5.5222 Excessively strict regulation 5.4523 Major asset price volatility 5.3824 High taxation 5.2525 Government spending cuts 5.2526 Changing legislation 5.2327 Inflation 5.0928 Piracy 5.0929 Increased protectionism 4.8530 Sovereign debt 4.8131 Poor/incomplete regulation 4.7832 Urbanisation 4.7533 Expropriation of assets 4.6934 Demographic shift (eg ageing population, youth emigration) 4.6835 Riots and civil commotion 4.5436 Flooding 4.5237 Food security 4.5138 Climate change 4.4939 Water scarcity 4.4840 Terrorism 4.4741 Pandemic 4.4642 Harmful effects of new technology (eg nanotechnology, EMF) 4.4643 Population growth 4.3844 Abrupt regime change 4.2645 Windstorm (eg hurricane, cyclone, typhoon) 3.9246 Threats to biodiversity and conservation affecting our operations 3.8547 Drought 3.7148 Earthquake (including tsunami) 3.6849 Volcanic eruption (including ash) 3.6550 Impact of space weather (eg solar flares) 3.33Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 35Chart 19top 50 preparedness scores in 2011 – rest of the worldRisk1 Cost and availability of credit 6.812 Corporate liability 6.793 Reputational risk 6.764 Fraud and corruption 6.605 Supply chain failure 6.346 Interest rate change 6.207 Loss of customers/cancelled orders 6.168 Failed investment 6.119 Critical infrastructure failure 5.8810 Industrial/workplace accident 5.8711 Energy security 5.8312 Theft of assets/intellectual property 5.7913 Rapid technological changes 5.7414 Cyber attacks (malicious) 5.6915 Major asset price volatility 5.6516 Price of material inputs 5.6517 Talent and skills shortage (including succession risk) 5.6518 Insolvency risk 5.6519 Cyber risk (non-malicious) 5.6120 Poor/incomplete regulation 5.6021 Strikes and industrial action 5.5822 Currency fluctuation 5.4623 Excessively strict regulation 5.4624 Changing legislation 5.4625 Inflation 5.3726 Piracy 5.3727 High taxation 5.2328 Increased protectionism 5.0529 Government spending cuts 5.0530 Sovereign debt 5.0031 Flooding 4.8632 Riots and civil commotion 4.8133 Terrorism 4.5434 Food security 4.4335 Population growth 4.4136 Expropriation of assets 4.3937 Pollution/environmental liability 4.3838 Urbanisation 4.3339 Earthquake (including tsunami) 4.3140 Water scarcity 4.1041 Abrupt regime change 4.0642 Demographic shift (eg ageing population, youth emigration) 4.0443 Drought 3.8444 Climate change 3.6145 Windstorm (eg hurricane, cyclone, typhoon) 3.5846 Harmful effects of new technology (eg nanotechnology, EMF) 3.5647 Pandemic 3.2748 Threats to biodiversity and conservation affecting our operations 3.2149 Volcanic eruption (including ash) 2.6950 Impact of space weather (eg solar flares) 2.27Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 36 appendixappendixcontinuedChart 20top 50 preparedness scores in 2011 – north americaRisk1 Corporate liability 6.672 Reputational risk 6.523 Cost and availability of credit 6.424 Fraud and corruption 6.415 Cyber risks (non-malicious) 6.416 Rapid technological changes 6.387 Insolvency risk 6.218 Cyber attacks (malicious) 6.179 Interest rate change 6.1510 Theft of assets/intellectual property 6.1511 Strikes and industrial action 6.1512 Loss of customers/cancelled orders 6.1513 Industrial/workplace accident 6.1114 Major asset price volatility 6.0715 Supply chain failure 6.0616 Failed investment 6.0117 Talent and skills shortage (including succession risk) 6.0018 Currency fluctuation 6.0019 Pollution/environmental liability 5.9820 Energy security 5.9721 Flooding 5.9322 Critical infrastructure failure 5.9123 Price of material inputs 5.8824 Excessively strict regulation 5.8125 Inflation 5.7226 Piracy 5.6927 Expropriation of assets 5.6528 Poor/incomplete regulation 5.6029 Increased protectionism 5.5830 Population growth 5.5531 High taxation 5.5332 Sovereign debt 5.4733 Riots and civil commotion 5.4734 Demographic shift (eg ageing population, youth emigration) 5.4735 Urbanisation 5.4036 Windstorm (eg hurricane, cyclone, typhoon) 5.3237 Government spending cuts 5.2838 Changing legislation 5.2639 Water scarcity 5.2540 Abrupt regime change 5.2341 Terrorism 5.2242 Drought 5.1343 Climate change 5.1044 Earthquake (including tsunami) 5.0445 Harmful effects of new technology (eg nanotechnology, EMF) 5.0046 Pandemic 4.9047 Threats to biodiversity and conservation affecting our operations 4.8748 Food security 4.8549 Volcanic eruption (including ash) 4.5350 Impact of space weather (eg solar flares) 4.44Score – out of 10 0 1 2 3 4 5 6 7 8Lloyd’s Risk Index 2011
    • 37REFERENcEs REFERENcEs: 1. Lloyd’s 360 Risk Insight. ‘Global Business Leader Survey: Risk Priorities and preparedness’. www.lloyds.com 2. ISAE Italian Index of Consumer Confidence, October 2011 3. Insee Index of business confidence, September 2011 4. Conference Board sentiment index, September 2011 5. Federal Reserve Bank San Francisco Economic Letter, January 2010 6. Chinese Ministry of Industry and Information Technology, August 2010 7. www.theengineer.co.uk, March 2011 8. Dan Karpenchuk, ABC Australia, May 2011 9. nexxt.org 10. Andrew Monahan et al, Wall Street Journal, wsj.com, February 2011 11. Keidanren Growth Strategy 2011, www.keidanren.or.jp 12. Oxford Metrica Reputation Review, 2010 13. http://www.guardian.co.uk/business/2011/feb/03/ shell-nigeria-analysis-environmentalist-criticisms, http://www.globalsecurity.org/military/world/war/ nigeria-2.htm 14. Martin Feldstein, China Daily, March 2011, www.chinadaily.com.cn 15. Financial Markets Law Committee, October 2011, www.fmlc.org 16. China.org.cn, June 2011 17. BBC, August 2011, Insurance Daily, August 2011, www.insurancedaily.co.uk 18. Symantec Internet Security Threat Report Volume 16, Sept 2011 19. PwC Information Security Breaches Survey 2010, www.pwc.co.uk 20. Lloyd’s and RAND, Litigation and business: transatlantic trends, 2008, www.lloyds.com 21. Lloyd’s, Andrew Rees, David Sharp, Drilling in Extreme Environments, 2011, www.lloyds.com 22. Munich Re 2011 half-year natural catastrophe review, http://www.munichre.com/app_pages/www/@res/pdf/ media_relations/press_dossiers/hurricane/2011-half- year-natural-catastrophe-review-usa_en.pdf 23. ‘Scientists in the dock’, The Economist, September 2011 24. RMS (www.rms.com), EQECAT (www.eqecat.com) and AIR Worldwide (www.air-worldwide.com) estimates, April 2011DisclaimerExcept for the Executive Summary (pages 3-8), which was written by the Economist Intelligence Unit (EIU), the Lloyd’s Risk Index has been prepared by Lloyd’sbased upon the results of a survey carried out for Lloyd’s by the EIU in August 2011 and is published for general information purposes only. While care has beentaken in producing this document, Lloyd’s does not make any representations or warranties as to its accuracy or completeness and accepts no responsibility orliability for any loss occasioned in reliance upon it.Lloyd’s Risk Index 2011
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