Retail and Transport sectors: soft targets

Insurance and Reinsurance, Piracy and Terrorism, Safety and Security — By on February 7, 2014 at 10:08 PM

Lloyds-of-London-AAS-225x300Friday 07 Feb 2014 - Retail and transport sectors face the highest risk of terrorist attack, according to the latest research from Lloyd’s broker Aon. (source: Lloyd’s of London)

Aon’s 2014 Terrorism and Political Violence Map measures the threat of political violence to international business based on the following risks: terrorism and sabotage, strikes, riots, civil commotion and malicious damage, political insurrection, revolution, rebellion, coup d’etat, war and civil war.

According to the research, in 2013 33% of terrorism attacks affected the retail sector while 18% impacted the transportation sector.

Events such as the Westgate shopping mall attack in Kenya last year underline the potential vulnerability of retail businesses. For three days in September 2013 gunmen attacked the shopping centre in Nairobi, resulting in 72 deaths and injuring over 200 people.

“Aon have identified businesses where there is free access by the public, as so-called soft targets,” says Paul Hopkin, technical director of the Association of Risk and Insurance Managers [Airmic]. “Any operation where you welcome the public creates soft targets. For example transportation facilities, shops, hotels, leisure centres and cinemas.

“There’s a significant amount of work going on amongst Airmic membership [to mitigate terrorism risk] and the security screens you see at airports are becoming increasingly utilised at hotels and big office blocks,” he adds. “The more prestigious the office block the more rigorous the security they put you through – to airport standards sometimes.”

The retail sector is also vulnerable to political violence, with supply chain interruption in the garments sector a feature of the Arab Spring, and business interruption a significant feature of the Bangkok riots in 2010.

The ongoing political crisis in Thailand continues to have an impact on the retail and hospitality sectors, with hotel and flight bookings falling in recent weeks. The protests may cost the local travel industry 22.5 billion baht (£420m) this quarter, according to the Tourism Council of Thailand.

On 24 April last year Rana Plaza, an eight-story commercial building, collapsed in Savar, Bangladesh, killing 1,129 workers. This tragic event was quickly followed by civil unrest and over 70 days of strikes and protests about poor working conditions and low wages in the garments industry.

Terror gap widening

Despite some improvements in its ratings in Aon’s 2014 Terrorism and Political Violence Map, Africa remains a continent of high political violence and terrorism risk, with 22 countries being attributed high to severe risk ratings (a 33% share of such countries globally).

The ongoing fallout from the Arab Spring continues to impact the whole Middle East and North Africa (MENA) region and in 2013 more than half of all terrorism attacks took place in MENA, up from 41% in 2012. This increase is attributed to a new strain of Salafi Jihadism that has emerged in the region, according to Aon Risk Solutions.

While the global picture appears to be improving in relation to terrorism and political violence, with 34 countries achieving reduced country risk scores, in actual fact there is a widening gap of risk, warns Henry Wilkinson, head of intelligence and analysis practice at Risk Advisory.

“In reality the picture is a lot more nuanced and there is a widening gap of risk,” he says. “Countries which are severe to high risk are actually getting an awful lot worse. [The improvement in some countries' risk ratings] doesn’t necessarily mean the world is becoming a safer place.

“Despite signs of global economic recovery, businesses… are as exposed as ever to a diversifying array of risks and threats from sophisticated and often highly networked adversaries,” he continues. “New threats can emerge increasing rapidly, as hostile [factions] evolve faster and emulate tactics that have an ever greater impact, be it through mobilising mass unrest or mounting sustained armed terrorist attacks.”

Brazil was the only Latin American country to see its risk rating increase from medium to severe in this year’s risk map due in some part to widespread anti-government protests throughout 2013. The elevation of Brazil’s risk score in the run-up to the 2014 World Cup and identification of the Winter Olympics in Sochi, Russia, as a potential terrorist target, highlights the increased exposure associated with major sporting events.

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