Guide to using the country risk model
| 3.2 and above | Severe |
| 2.4 to 3.1 | High |
| 1.6 to 2.3 | Elevated |
| 0.8 to 1.5 | Caution |
| 0 to 0.7 | Low |
The numbers on CREAM range from 0 to 10, and are designed to represent our assessment of risks to assets and people. They are an aggregation of the incidents which are forecast to occur under each risk category in the various countries (combining the frequency and the scale of damage caused).
Defintions
War is defined as the state use of force. War includes interstate war or the state use of force in counter-terrorism, riot control or counter-narcotics operations.
Terrorism is damaging violence of any kind, no matter what the motive. State sponsorship of terrorism would not make the risk a War risk unless the terrorist were acting as regular forces as defined in the Geneva Conventions. (i.e. openly uniformed and identified).
Civil Unrest is the likelihood that protests, riots, or strikes cause significant damage to assets or interrupt business operations.
Political Risk is the likelihood investors suffer an unexpected loss due to events such as asset expropriation, surprise changes to the legal, regulatory, or external trading environment, the government reneging on its contractual obligations, corruption, currency inconvertibility, and exchange transfer.
The Numbers
War, Terrorism, Civil Unrest and Political Risks are given numerical ratings on thirty day, one year and three year horizons. They are therefore predictive, and represent the average level of risk to assets and people over the time periods in question.
Taken in isolation, the numbers have little meaning. Instead, they are designed to enable the comparison of:
The numbers are divided into bands which have been accorded terms and colours. These are consistent with the system used by US Homeland Security.
The Editorial Team meets every fortnight to conduct a formal review of numbers. In between meetings, editors in each region have the authority to recommend moving the numbers in their countries at the daily morning meeting. When approval is granted by the Senior Editor, the regional editor will move the numbers accordingly.
Risk Maps
Risk maps aim to give clients an indication of the level of violent risk at any specific location within a country. They are therefore a useful analytical tool for clients wishing to focus on a specific asset. The maps are generated from historical data on such things as bomb explosions, riots, shootings or explosive seizures.
Each such event is defined by its longitude and latitude, and then accorded a size based on our assessment of its significance. For example, the October bombing in Egypt's Sinai would have been given a relatively large size because it revealed weaknesses in security around tourist resorts, and also because it demonstrated a significant terrorist capability that poses a future threat.
On the risk maps, this sort of event generates a value which then dissipates as one moves away from it geographically, and also as time passes. Any one point on the map is a complex aggregation of these events.