As one of the most prosperous UK territories, Bermuda faces a number of risks arising from its background of commercial success according to a UK National Audit Office report commissioned by the Foreign and Commonwealth Office.

The report, entitled National Audit Office Value for Money Report: Managing risk in the Overseas Territories, focuses on areas in which each territory has progressed, including achievements by the Island in disaster management since 1997, such as drawing up a draft national disaster plan to respond to its main risk events, supported by sector-specific plans.

Looking at the economic risk posed to the country, the report concludes that over a period of years it has become less attractive to ex-pats and international companies and less competitive as a financial centre, due to the rising cost of living and doing business there.

It also highlights restrictions on entry by guest workers, who can take a year to receive work permits, can lead to protracted vacancies in key and specialist posts, in both the public and private sector.

It reads: "Sustained efforts will be needed to ensure that the jurisdiction maintains its positive international reputation and its competitive edge through which such notable success has been achieved, recognising that other centres are becoming increasingly positioned to compete directly with Bermuda."

Meanwhile, Bermuda's exposure to natural disaster risks is amplified by a number of factors, including its isolation from the nearest mainland by 600 miles, with disaster plans assuming no significant external help for at least the first 24 hours, the impact of any disaster on thousands of people and the potential breaching of the single causeway linking the main island to the airport by hurricanes and the risk of a tsunami caused by the lateral collapse of the Cumbre Viejo volcano in the Cape Verde Islands.

The report went on to identify the vulnerability from heavy economic dependence on financial services and tourism.

On the plus side, it recommended Bermuda as leading light for other territories in terms of identifying, monitoring and evaluating risks.

It concluded: "Bermuda has set a positive example by testing hijacks and other terrorist incidents, airport mass casualties, fire on a cruise ship, oil spills and protracted public disorder."