Multinationals underestimate the social risks they are exposed to
Source: Middle East Insurance Review | Dec 2021
Not enough global companies are giving the desired attention to the human rights risks they are exposed to, in countries where they have operations or in commercial hubs according to global risk and strategic consulting company Verisk Maplecroft.
Verisk’s Cities@Risk Social Index 2021 revealed that nine of the world’s top 100 locations for FDI – including Shanghai, Istanbul and Beijing – are ranked as running extreme risk in Verisk’s human rights tracker. A further 29 cities are ranked as high risk.
An extract from its Human Rights Outlook 2021 report said, “Most organisations will have assessed their exposure to climate-related or political risks, but not enough will be paying close attention to the human rights environment, which could be just as damaging to their interests if they are caught up in abuses against citizens or workers.”
Cities@Risk Social Index measures civil and political rights, labour rights, poverty and human rights. It found 426 of 575 cities register as extreme risk or high risk. Verisk said this “brings into question the ESG credentials of a swathe of important commercial hubs”.
“This doesn’t mean that organisations investing in these locations will be complicit in any human rights abuses, but it does raise their risk exposure and the chances of reputational, legal and financial damage if violations are linked to their investments, operations or suppliers.”
Thirty-three of the top 100 FDI locations, which attract $71bn of inward investment, rank as high or extreme risk according to the 2021 Index. This rises to 38 when excluding poverty factors.
Asia is home to 240 cities ranked as high or extreme risk. With the exception of Europe and Central Asia, the risk is spread globally, with investors and companies widely exposed to social risks in the metropoles of nearly all regions. M