Businesses around the globe are continuously looking for their next lucrative investment opportunity but as the recent cases in Bolivia and Ecuador demonstrate, government intervention in the oil and energy sector can have serious implications for foreign investors with assets abroad, Aon has warned.
Aon said these latest cases, which many believe could have knock on effects across countries within Latin America and other parts of the world, serve as a harsh reminder to business of the possible losses they face through their foreign investments.
According to the broker, businesses are often well aware of the more traditional risks facing their operations yet few effectively assess their political risk exposure.
Aon said that in the case of property and casualty risk, the losses that arise are covered under traditional insurance packages due to the ability to apply quick repair solutions to these circumstances.
It warned however, that risks such as nationalisation can lead to the permanent loss of a company's foreign investments.
Charles Keville, a director in Aon's crisis management team, said: “Globalisation continues to increase. At the same time, international businesses are seeking to recover ever greater returns from their investments. As a result, countries with volatile political situations are increasingly becoming part of the commodity supply chain.
"For businesses with international operations and assets abroad, this means a greater political risk liability and potentially higher losses.
“Political risk is unpredictable which underlines the importance of businesses continuously monitoring the markets in which they choose to invest and operate.”
