By Emma Clark BBC News Online business reporter

Military spending is set to increase

Selling black market T-shirts with Osama bin Laden on the front is a lucrative business in Indonesia.

An alternative line featuring Saddam Hussein, however, has proved disappointing.

It seems the Muslim clientele don't share the same enthusiasm for Iraq's nationalist leader.

Adapting to geopolitical changes, security threats and the prospect of a war in Iraq is a challenge for any business.

Most are set to suffer from increases in the oil price, poor consumer confidence and even disruption to their operations.

"It is fair to say that the situation now with a possible war in Iraq and the threat from Al-Qaeda is extremely difficult for businesses to manage," said Nicola Hudson of Control Risks Group, a specialist in business risk.

The losers

The biggest victims have been the airlines, which are particularly vulnerable to rises in energy costs.

British Airways, which was ejected out of the FTSE 100 this week, has been long-suffering since the 11 September attacks on the US.

"As a war would inevitably have a detrimental effect on the whole of aviation, it goes without saying that everybody in the industry wants the Iraq situation to be resolved peacefully, and as quickly as practically possible," said Rod Eddington, chief executive.

Everybody in the industry wants the Iraq situation to be resolved peacefully Rod Eddington British Airways

The company has "prepared for the worst" by accumulating more than �2bn of cash to cover any fall in revenue in the event of a prolonged war.

A downturn in holiday bookings, meanwhile, has forced package operator First Choice to cut capacity.

The number of holidays booked for the summer are already 4% lower than they were last year, it said.

Outside the travel industry, advertising companies have seen their clients less willing to spend during times of uncertainty.

And even IT companies have ranked war as a serious threat to recovery, according to a recent survey by PR Network.

The winners

But there are some businesses capable of thriving in these adverse conditions.

A 24-hour helpline manned by consultants at Control Risks Group has been buzzing as the company's clients call up for advice.

"An American business man might call to ask whether he should travel to Saudi, while companies in the Middle East might want to know when families should be leaving," said Ms Hudson.

Oil multinationals hope to win concessions in Iraq

"There is no doubt that we have seen a rise in the companies using our services. They are revisiting contingency plans and looking for the best up-to-date advice."

Control Risks, which serves 86% of the companies in the FTSE 100, has been operating since 1975, but has recently seen more competitors come onto the scene.

"Security and risk analysis is much more on the boardroom agenda than it ever was," added Ms Hudson.

As a result, the company has expanded its security division, which deals with contingency planning and the evacuation of staff.

War effort

One sector more intimately identified with the build-up to war in Iraq is the oil industry.

Leaked reports suggest oil multinationals are already jostling to win concessions in any post-war reconstruction of Iraq.

ExxonMobil, Unocal, BP and Shell are all reportedly involved in informal negotiations with US officials and the Iraqi exile community.

The spike in the oil price could also boost profits for oil companies, although some analysts argue that any gains are offset by a commensurate rise in costs.

There is no business upside to war Bernard Carey Smiths Group

Inevitably, war also brings spoils for defence companies.

"Conflict invariably leads to increased demand," said Terry Twigger, chief executive of Meggitt, a UK company that supplies spare parts to military aircraft.

Suppliers of military equipment usually perform better than the contractors, such as BAE Systems and France's Thales, because they have a more diversified client base, according to defence analyst Harold Hendrikse from Credit Suisse.

Military spending

Some 36% of Meggitt's turnover in 2002 came from supplying military equipment, including decoys used against radar-seeking missiles and model aeroplanes for target practice.

"Over the last two years there has been a steady and sustained increase in military expenditure," said Mr Twigger.

"Whereas three or four years ago, spending had dropped when the world seemed a lot safer place."

A surge in demand for military spares has also helped to buoy up profits at Smiths Group, another supplier.

However, both Smiths and Meggitt also have large divisions supplying the civil aerospace sector - and have seen sales drop in this area.

In the diversified and cyclical world of modern business, only true opportunists like the T-shirt seller can really cash in on conflict.

As Mr Carey points out: "There is no business upside to war.

"In the long-run we may benefit from increased [military] spending, but it will average out in time."