A coup in Thailand creates disruption for overseas companies with subsidiaries or suppliers in that region. Simmering nuclear tensions in Iran and North Korea create enormous political and diplomatic stress for global businesses. Natural and man-made disasters disrupt international supply chains.

These and other complexities of conducting business on a global scale shift and expand every year. Nationalism and arbitrary regulation, political violence and regional upheaval, and supply-chain disruption brought on by tsunamis, earthquakes, floods, pandemics and other natural disasters have emerged as significant threats to the balance sheets of multinational corporations, according to the latest global analysis by Aon.

Each year, Aon's political risk and trade credit experts analyze the political and economic risk climate in more than 200 countries. Their findings are illustrated in the annual update of Aon's Political and Economic Risk Map, now in its 14th year. The latest Political and Economic Risk Map shows that of the 214 countries surveyed in 2006, 17 pose less of a risk in 2007 compared with 2006, contributing to a decrease in the overall level of global political risk for the first time in three years.

Still, keeping informed of the changing risk profiles of established and emerging countries around the world has become a business imperative for multinational organizations seeking to protect their assets, reputations and shareholder value.

How Growing Nationalism can effect multinational corporations

Nationalism is a political ideology that holds that a nation is the fundamental unit for human social life, taking precedence over any other social and political principles. Incidents surrounding modern-day nationalism have become increasingly problematic for multinational organizations, especially those conducting business in emerging or volatile economies.

Oil-producing countries, for example, are seizing local resources that were once owned by or shared with international oil companies. This can involve a "blanket" country action, such as Bolivia's nationalization of the oil and gas industry in May 2006, or a more targeted action through arbitrarily imposed regulations and interference against individual projects, such as Russia's recent moves against the Sakhalin II oil and gas project or BP's TNK-BP oil company.

The conditions that accompanied the surge of nationalization in Latin American countries in the 1970s have returned, including high natural resource prices and an increase in the number of global economic players. Venezuela recently announced its intention to target its power and telecom industries for nationalization, two sectors that were privatized in the early 1990s.

Regulatory Challenges abroad in the face of the Sarbanes-Oxley Act

In addition to the threat of nationalism, companies conducting business abroad are facing greater scrutiny from both internal and external regulatory bodies, including nongovernmental organizations. "There are severe corporate governance and reputation risks involved," says Roger Schwartz, senior vice president of Aon Trade Credit Political Risk Practices. "Companies must be aware that pressures from their own government might just as easily form the root of their problems. It is not always the foreign government or country that creates the risk."

According to Oxford Analytica Senior Consultant Sam Wilkin, "The types of risks shown on the map have serious consequences for business. This is doubly true in the era of Sarbanes-Oxley, now that companies are increasingly held to account for labor practices at even distant points of their global supply chains." Oxford Analytica collaborates with Aon Trade Credit on the annual political risk analysis for the map.