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Risk Management
Friday, December 11, 2015 - 03:16
Out of the comfort zone

As multinational and South African companies contribute to the development of the economy within the region through rapid growth on the continent, they are also exposing their customers, employees and assets to new risks and threats. This increase in risks and threats is due to the changing geo-political situation, which is completely different than it was years ago.
As Christof Bentele, Head of Crisis Management at Allianz Global Corporate & Specialty (AGCS) SE observes, “Businesses dealing with more issues outside their comfort zone. This applies to both country risks and the factors behind these risks. Whether that is the ever expanding supply chain or the growing threat of terrorism, political violence, or kidnapping: businesses have to deal with more issues outside their comfort zone than ever before.”
SA companies top job creators
According to the 2015 Africa Investment Report, Foreign Direct Investment (FDI) to Africa increased by 64 percent to $87 billion confirming the growth of multinationals and South African companies within the continent.  In total, 464 companies invested in the region in 2014. South African companies were the top job creators for intra-African investment at 6964 jobs.
“These companies need to work closely with crisis management experts for tailored solutions in the area of crisis management, terrorism and political risk insurance as well as related services to ensure they respond better in a time of crisis within the countries that they are operating in.” Businesses need a comprehensive crisis management coverage, which should ideally include preventative crisis consultation and goes far beyond an insurance product.
Terrorism spreads fear and terror
International terrorism, in particular the type driven by political, ethnic, religious or ideological motives, has blazed a trail through Africa to spread fear and terror especially in countries such as Nigeria, Niger, Cameroon, Somalia, Kenya and Sudan.
Although the capability of terrorist groups to launch cross border attacks akin to 9/11 has largely been dismantled, the threat of terrorism remains, he warns. “The last few years have seen a significant shift in the size of engagement; from complex international terrorism plots, to an increase in localised, home-grown, focused attacks.”
Kidnapping on the rise
The risk of kidnapping has increased drastically in terms of frequency and brutality with Nigeria, Mali, Chad, Algeria, Libya, South Sudan, Central Africa Republic and others are hot spots in Africa. Kidnappers target frequent male business travellers and then seek ransom from the organisations they work for.
The main focus within this area is obviously to ensure the freedom of the hostage. But there are also a number of other elements that accompany a case like this, for example strategic assistance and the preparation of information for management teams within companies, incorporating the affected family, communication strategies, conducting negotiations, communication with public authorities, etc.
Political disruption, now a bigger concern
Political or social upheaval was a much bigger concern for businesses in the 2015 Allianz Risk Barometer - an annual survey of over 500 risk experts worldwide - rising nine positions to ninth overall compared with last year’s results. This risk may become an even bigger concern for businesses in 2016 because political violence may increase in a number of countries such as Burundi, South Sudan, Mauritania and others.
“Big falls in commodity prices and a slowdown in China and other emerging economies may also have implications for political violence,” says Bentele. “Financial disruption often goes hand in hand with political instability. And with increased poverty, as can be seen in parts of Africa, comes extremism.”
Political situations always in a state of flux
It is imperative for companies operating in countries that are going through political or social upheaval to think deeply about how they can best protect their customers, employees and assets. Businesses will need to work very closely with crisis management experts from government, insurance and civil society to ensure that they have highly comprehensive and agile strategies.
The experts need to enable clients to carry out evacuations in high-risk situations at short notice and provide prevention, risk mitigation and on-the-ground response services for emergency incidents. In evacuation cases it's a question of providing the resources and staff for rapid evacuation from politically unstable areas.
Many, but far from all, companies already have contingency plans in place so they can respond in the event of a crisis caused by political violence. However, it is important to remember that the political situation is always in a state of flux – 24 hours a day, seven days a week, 365 days a year.
Prepare for crisis during peace time
“Companies should prepare themselves for a crisis during peace time,” says Bentele. “Such preparation will help them to work quickly and efficiently if a crisis does occur, and also to approach crises in a more confident and robust way.” Within the company simulations or exercises can be used to fix any potential discrepancies, so that certain scenarios don't have to be "endured" for the first time during an actual crisis. This can be a question of skills or processes, or simply of strategic decisions that can be made with a cooler head outside of a crisis situation than in the middle of one.

Copyright © Insurance Times and Investments® Vol:28.12 1st December, 2015
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