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July 20: Business barriers between countries lifted after the end of the cold war created a free conduit for risk to travel the same path ─ Lloyd’s chairman     (Copyright Thompson’s World Insurance News)     Business has been quick to take advantage of the new opportunities to sell goods and services all over the world since then, said Lord Levene.     Introducing a Lloyd’s 360 insight seminar, he said in the 1990s, and for the early part of this century, it really did seem to be a case of the triumph of the West.     Then, all of a sudden, one day early in the autumn of 2008, Lehman Brothers’ collapsed and across the West, bankers who had for years been lionized as great generators of wealth were quickly rebranded as the pariahs of the global economy, as their organizations went to the taxpayer cap in hand.     Lots of column inches have analysed what went wrong. But one phrase, I think, sticks in the mind above all: systemic risk      “The barriers which had been lifted to allow goods, capital and people to travel freely from country to country had also created a free conduit for risk to travel the same path.”     He went on: “We are now all very familiar with risks associated with the movement of capital, or debt.     “But this is not the only potential systemic risk for businesses. From pandemics, to supply chain failures, globalization means that businesses are exposed to events which happen far away from their head offices in London or in New York.     “Distance is no longer nature’s insurance policy which insulates you from the disasters and tragedies happening on the other side of the world.     “When the Icelandic volcano last erupted in 1821, it poisoned a few cattle who were grazing on its slopes. A 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 a day in lost productivity.”     International businesses are not simply passive victims of globalisation. They are also major beneficiaries of the breakdown in trade barriers.     They have a third role which is usually underemphasized ─ they are highly active agents in creating and managing the global frameworks which move people and goods around the world, whether that is the construction of a railway, the operation of a mobile phone network or indeed underwriting an insurance policy on a transnational oil pipeline.     Asking what will the successful international firm – whether large or small – look like in the future he said:     “The characteristic which distinguishes between failure and success will require a mobility of mind as much as a mobility of action.     “We need to think global. We need to know what is happening in the countries where we build factories, invest capital or sell services.     “We need to understand the risks in these places and crucially how a failure in location X will effect our operations in location Z.”     Lord Levene added: “One of the great lessons of the financial crisis has been the need to bring a sense of duty back to the boardroom. And global firms must accept that they have responsibilities across the world, not simply in their home countries.”     Lloyds remains a strong advocate of world trade and free markets.     “The financial crisis has reminded us that removing trade barriers carries risks, but we do not believe that fact creates a case for reconstructing the obstacles that prevented us from trading with many nations in the seventies and eighties.     “We cannot go backwards. We must not go backwards. We should not be protectionist. Instead we must manage these risks better.”        Thompson’s World Insurance News P.O. Box 1027,  Waterloo, Ontario,  Canada  N2J 4S1 Tel: 519-579-2500 Fax: 519-745-7321 mpub@sympatico.ca THOMPSON’S WORLD INSURANCE NEWS , Canada’s only independent weekly for p&c insurance professionals, has been the industry’s most trusted news source since 1988.