Global Terrorism Risk

1. World Markets Analysis Global Terrorism Risk Guy Dunn (guy.dunn@wmrc.com) World Markets Research Centre

2. Agenda • Definition of Terrorism • Analysis of Major Terrorist Attacks Since 1945 • Location: regional split of attacks? • Targets: how often is business targeted? • Perpetrators: Islamic extremist or domestic? • Conclusions: Assessment of Risk Going Forward • Which sectors/countries are at greatest risk? • Findings of Global Terrorism Index • Questions & Answers

3. World Markets Research Centre (www.wmrc.com) • Global Insight (formerly DRI-WEFA) company • Provider of enhanced country risk intelligence • Same-day Analysis, 5-year forecasts and Country Risk Reports on 196 different countries – focusing on politics, economics, security, operational, tax and legal risks • Our focus is country risk analysis, modelling and forecasting • 60 full-time analysts divided into six regional teams – backed up by 120 in-country advisers/stringers • 500 separate government, academic and corporate clients located in 45 different countries worldwide

4. WMRC’s country risks expertise • Country risks analysis on 196 countries • Sovereign risks analysis on 196 countries • Global Terrorism Index – 186 countries • Corruption ratings provided to Transparency International on 186 countries • Terrorism risks analysis on 186 countries provided to Aon • 13-factor risk ratings provided for World Bank report on 186 countries • Bespoke risk analysis work carried out for various clients

5. WMRC’s Definition of ‘Terrorism’ • ‘Terrorism is the unlawful and premeditated use of violence intended to coerce or intimidate a government or civilian population as a means of advancing a political or ideological cause.’ • Terrorism has 5 main components: • Violence • Premeditation • Ideology • Fear • Group or individual: sovereign states are not considered to be terrorist entities.

6. Scale of Terrorist Attacks Since 1945

7. Major Terrorist Attacks Since –1945 (>50 casualties)

8. Regional Split of Major Terrorist Attacks Since 1945

9. Perpetrators of Major Terrorist Attacks Since 1945

10. Total Terrorist Attacks Since 1981

11. Terrorist Attacks 2003 - Fatalities

12. Conclusions: Assessment of the Risk Going Forward • Will the number of terrorist attacks continue to grow? • What is the risk of more indiscriminate attacks designed to cause mass casualties? • Who will be the main perpetrators of these attacks? • To what extent will business be considered a legitimate target? • Are any sectors at particular risk of being targeted? • Which regions/countries are most at risk?

13. What is the Global Terrorism Index aiming to do? • Terrorism was always central to our security risk rating • However, clients often considered it a peripheral threat: • the impact was usually limited to just the targeted country • whilst tragic, most attacks were effectively small-scale • This changed after the attacks on 11 September: • business was specifically targeted • the indiscriminate nature of the attacks • the internationalisation of the terrorists’ grievances • The War on Terror is set to be the key determinant of US foreign policy (and hence global current affairs) for the rest of the decade

14. What is the Global Terrorism Index aiming to do? • Clients feel that terrorism is a very real threat that will get worse before it gets better • Clients need accurate, up-to-date and independent analysis of the risks they face from terrorism in all the countries they operate • To meet these needs we used our country risk modelling skills to produce our Global Terrorism Index.

15. What is the Global Terrorism Index aiming to do? • Our Index is designed to assess the risk of terrorism in each country, and against that country’s interests abroad, over the next 12 months • It does this by qualitatively rating five key factors for each country – Motivation, Presence, Scale, Efficacy and Prevention – and then giving each of these a quantitative weighting in order to determine its overall Terrorism Risk

16. Terrorism Index Criteria - % Breakdown

17. Global Terrorism Index 2004 - Africa Region

18. What are the key findings? • The US has the 6th highest risk of terrorism. Another 11 September-styled terrorist attack is highly likely • The UK faces the greatest risk from terrorism of any Western European state, and is ranked 10th overall • Iraq is ranked top, followed by Colombia and Russia

19. What are the key findings? • Afghanistan, Pakistan, Saudi Arabia, Israel and Nepal make up the rest of the top ten • North Korea came bottom of the survey despite its membership in the so-called ‘Axis of Evil’ • Tourism, energy, financial services and telecoms perceived to be most at risk of terrorism in our Client survey • US, UK companies perceived to be most at threat in Client survey – followed by Spanish, Australian and French companies

20. Global Terrorism Index 2004 - Regional Averages

21. Which regions/countries are most at risk? • Asia, the Middle East and Eastern Europe are the location for most attacks (97.8% of all 2003 attacks) • The following countries are most at risk of being targeted in a major terrorist attack: • Afghanistan, Algeria, Colombia, France, India, Indonesia, Iraq, Israel, Italy, Kenya, Kyrgyzstan, Nepal, Pakistan, Peru, Philippines, Russia, Saudi Arabia, Spain, Sri Lanka, Tajikistan, Tanzania, Thailand, Uzbekistan UK, US, Yemen.

22. Do you think terrorism poses a greater risk to than five years ago?

23. Will the number of terrorist attacks continue to grow? • The overall number of attacks has actually decreased quite significantly from its high in the 1980s • This is mainly down to the demise of ultra-leftist groups in Western Europe, as well as to the resolution of the violence in Lebanon • In spite of the hyperbole surrounding terrorism in the media, there is no logical reason to assume that the overall number of terrorist attacks will resume the levels reached in the 1980s

24. What is the risk of more major attacks designed to cause mass casualties? • Whilst the overall number of terrorist attacks is on the decline, the number of major attacks is on the increase • There have already been more major attacks this decade than in the whole of the 1990s • Indiscriminate attacks causing mass casualties are set to continue over the next few years: in 2002 more than 82% of those injured or killed in terrorist attacks were civilians • Furthermore, there is a very real risk of terrorists resorting to CBRN materials to carry out an attack

25. Who will be the main perpetrators of these attacks? • Al-Qaida and other associated Islamic extremist groups will remain the main perpetrators of terrorist attacks • The main characteristics of such groups are: • hostility to Western cultural, military and business hegemony • willingness to cause mass civilian casualties • propensity to carry out simultaneous attacks in different cities/even countries • ability to operate internationally – what links Morocco, the US, Saudi Arabia, Spain, Indonesia and Turkey?

26. To what extent will business be considered a legitimate target? • Business has long been considered a legitimate target by terrorists (for eg, the IRA targeting the City of London, Colombian guerrillas targeting oil pipelines etc) • The attack on the World Trade Center was effectively an attack against the most recognised symbol of US (or Western) capitalism • Almost 50% of international terrorist attacks in 2003 targeted business directly

27. Which sectors are most at risk from terrorism?

28. Do you factor the risk of terrorism into your decision-making process regarding investment locations?

29. Global Terrorism Risk