2024: The Year of Elections and the Potential for Civil Unrest

15 May 2024

Robust Risk Management Programs Protect Your Business Assets and Bottom Line.

South Africa joins over 60 countries that will head to the polls in 2024, with heightened risks for civil unrest reminiscent of July 2021 top of mind.

2024 has been dubbed THE election year, with voters in more than 64 countries heading to the polls. South Africa’s national elections will take place on 29 May, and there’s absolutely no doubt that the outcome of these elections will prove consequential for years to come.  There’s also concerns around the heightened risk for civil unrest and riots in the run-up, and even post elections, with the riots of July 2021 a stark reminder of how quickly a match can explode into a multi-billion Rand economic catastrophe and reputational disaster, and how truly unprepared we were for the fallout.

For businesses operating in this environment, even the slightest hint of potential unrest presents a myriad of risks that demand proactive management and meticulous strategic planning. The possibility of demonstrations, strikes, vandalism and even violent confrontations underscores the volatile nature of civil discontent. Such events can lead to severe disruptions in supply chains, property damage and loss of lives. Identifying and understanding the potential ramifications of these disruptions is crucial from a risk management perspective. It starts with thorough risk assessments, identifying vulnerabilities in processes, operations and supply networks. Key pressure points include:

Supply Chain

In Aon’s latest Global Risk Management Survey, supply chain or distribution failure made the top 10 risks at number six. “It is crucial to understand what risks are in the supply chain of a business and where business operations and income streams can be negatively impacted when production and distribution are delayed or disrupted. Today, supply chain risks involve the availability of talent, the ongoing solvency of critical suppliers, the ESG performance of a company’s supply chain and the increased intellectual property and cyber exposure triggered by shared supplier systems and processes,” says Danie Locke, Senior Risk Consultant at Aon South Africa.

The fact that there are shared suppliers in most industries compounds these challenges, with a single event able to compromise hundreds of companies with the risk intensifying in regions prone to upheaval or unrest. Mapping out any third-party suppliers or processes that could have an unintended effect on your business production line is key.  “The resulting complexity means that it is imperative to build visibility into the supply chain that extends beyond the most important suppliers and their geographic location and includes a keen understanding of suppliers’ capacity, utilisation levels and their dependency on other third parties. Profiling and quantifying the likely financial effects of losing a key supplier are critical to guide decisions around investments in resilience and adequacy of insurance cover,” Danie explains.

Damage to Property

The violent riots that exploded in KZN and Gauteng in July 2021 resulted in over R50 billion in property damage and 340 lives lost. The economic fallout of these riots was enormous. The quantum of damage to property and commercial operations and equipment, and the impact on business continuity was near catastrophic. Many businesses simply did not recover.

“Businesses rely on their assets to maintain optimal operations, such as property, plant, machinery & equipment, furniture & fittings, computers, through to vehicles, warehousing and stock. Major risks such as fire, theft, vandalism and civil unrest that damages or destroy such assets will compromise key business processes that impact the ability of the business to continue operations. In the case of specialised equipment and assets, the impact may be felt for months long after the cause of damage has passed,” explains Danie.

It is important to check whether your business property policies provide sufficient cover and accurately reflect the replacement value of its assets.  “The property cover provided to a business is based on declared values, that need to reflect the property of the business and its operational risk in full detail. This will provide critical financial support in a worst-case scenario where the business may be forced to abandon operations during protest action, for example. Maintaining and regularly updating a fixed asset register is a good place to start when quantifying the risk that property damage poses to the business,” says Danie.

Assets and business Interruption are key concerns. As a direct result of the July 2021 riots, Sasria reduced its coverage limits from R1,5bn for assets and business interruption to R500m.  For many large corporates, these limits are insufficient and will require additional cover in the form of a ‘riot wrap’ policy which provides additional coverage for loss of profit, contingent business interruption and material damage in excess of Sasria limits. The riot wrap cover also provides cover for exclusions of war and civil war which are not covered under Sasria.  “Essentially, where combined material damage and business interruption values exceed Sasria’s R500 million limit, the riot wrap policy will provide extended coverage in respect of the claim once the underlying Sasria (or primary limit) is eroded,” Danie explains.  

Business Continuity Management

In the realm of business continuity management, particularly in the face of political or crisis-related situations, the imperative lies in the proactive updating and implementation of comprehensive crisis plans. According to Nicolene Olivier, a global risk consultant at Aon South Africa, these plans are not static documents but dynamic frameworks that evolve alongside potential risks. Establishing strong communication processes will keep employees informed and updated during an event, as will the need to adopt robust security standards and provide training on crisis management and the company’s emergency procedures such as evacuation plans.

Central to this approach is crisis management, which serves as a protective shield for the organisation's reputation and brand integrity, and the safety of employees. “The cornerstone of effective crisis management is communication, both internal and external. It's vital to maintain constant vigilance for any emerging threats or events that could disrupt operations. Regular and transparent communication with employees is essential, ensuring they are informed and prepared for any potential shifts that may occur, swiftly,” says Nicolene.

A well-designed crisis management plan delineates the roles and responsibilities of various stakeholders, including designated teams for communication, legal, IT, HR and more. These teams form the backbone of a 24-hour operational centre, ready to respond decisively to any unfolding situation. “Coordination among these teams is paramount, from ensuring the safety and well-being of employees to addressing legal and regulatory implications.

In the event of activating the business continuity plan, considerations extend beyond mere physical infrastructure to encompass aspects like cybersecurity, off-site operations and contingencies for events like power outages. Effective communication remains central throughout, with clear directives ensuring that every individual understands their role and responsibilities within the plan,” Nicolene explains.

“Crisis communication, managed by designated spokespersons, serves as the public face of the company during turbulent times. All communication needs to be meticulously planned and executed through pre-prepared templates and contact lists, with a proactive approach ensuring that the organisation can navigate crises with agility and resilience, safeguarding its reputation and ensuring continuity of operations and safety of people,” she adds.

In these uncertain times, the ability to rebound, adapt and anticipate will be essential for businesses seeking to safeguard their interests and fulfil their commitments to stakeholders. As South Africa approaches a significant national election with the potential for civil unrest, commercial and corporate businesses must embrace a proactive stance towards risk management, business continuity and insurance.

Strengthening supply chains, enhancing security measures, conducting thorough risk assessments and maintaining up-to-date insurance policies are all strategies that can mitigate the impact of any upheaval. Revisiting and revitalising crisis management plans, particularly in terms of business continuity processes and crisis communication, will also prove invaluable. By taking these proactive measures, businesses can position themselves to navigate through uncertainty with resilience and confidence.