Globalization creates more costly risks

Risk management systems must take into account the effects of globalization if they are to help risk managers avoid increasingly inter-related risk exposures, according to Lord Levene, Lloyd’s chairman.
“We cannot simply try to hide away from risks, which travel further and faster than ever before,” he said during the launch of the new Lloyd’s 360 Risk Insight report, Globalisation Risks for Business.
“Distance is no longer nature’s insurance policy [that] insulates you from the disasters and tragedies happening on the other side of the world.”
The volcano eruption in Iceland earlier this year is an example of how one seemingly local event can have a big impact on businesses worldwide, Levene pointed out.
“When the volcano last erupted in 1821, it poisoned a few cattle grazing on its slopes,” Levene said. “One hundred and ninety years later, it has caused chaos among airline passengers throughout the world, with an estimated loss to European business of £400 million [Cdn$646.4 million] a day in lost productivity.”