How South Africa’s risk profile affects business insurance
The ratings agency downgrade South Africa narrowly avoided last week was a stark reminder of the challenging business environment South African businesses face. Business owners should continuously scan the environment they operate in for possible risks – new and old – because, as the old adage reminds us: prevention is better than cure.
What will 2017 hold?
As we stand on the threshold of a new year, it is important to take a broad view of the business environment going forward so that you can adequately prepare for the risks that may surface in the coming months. Reviewing all insurance policies with your broker will give you an opportunity to contemplate all the possible risks and ensure your business is comprehensively covered.
The South African economy faces three central and on-going problems – a volatile global economic environment, pressure on our water and electricity supply and high levels of household debt. Add to that an economy with macroeconomic imbalances, slow economic growth, high inflation, likely strikes and the effects of the current drought, and we can safely assume that the pressure on the economy – and consumers – will persist in 2017.
Business risks you should consider in 2017
Increasing pressure on consumers due to rising living costs particularly food and fuel, as well as the increasing cost of debt, directly impacts businesses as consumers have less disposable income to spend.
Damage or loss due to fire is a major hazard facing many South African businesses every year. It is a serious risk exacerbated by factors such as poor maintenance of fire protection equipment, inadequate fire protection in many business environments, ageing municipal infrastructure and poor service delivery.
Adverse weather causing damaging floods, storms and hail can also result in substantial damage or losses. This trend is set to continue with phenomena like El Niño predicted to continue throughout the summer of 2016/2017 and beyond.
For now, the electricity supply crisis seems to have been warded off, however the pressure on our national grid remains. The next and far more threatening problem is an impending and potentially devastating water shortage. Many manufacturing plants cannot operate without a certain and consistent water supply. The agricultural sector is likely to be the hardest hit by water scarcity - and is already seeing damage to crops and death of livestock in some parts of the country. This will negatively affect consumers through increasing food prices and the economy by eroding the Gross Domestic Product (GDP).
Aside from environmental challenges, businesses globally are facing more and more brazen cyber criminals who are managing to break through sophisticated online security controls. As a relatively new risk category, many businesses are still quite unprepared for the onslaught of cyber-crime. Staff education and higher levels of awareness are needed to teach business owners and their staff how to handle the different kinds of cyber-crime attempts.
Another persistent risk is organised crime such as theft and cash-in-transit heists. When it gets to crime, it is especially important to fully understand your policy wording, exclusions and obligations.
This year we saw a lot of social unrest and protest action due to poor service delivery and political discontent. This caused significant damage to public and private property and resulted in numerous insurance claims being lodged.
The good news
Garrun Group is ready to assist you and your business - contact your broker to set up a full review and assessment of your current commercial insurance. We will ensure that your business is comprehensively covered so you are prepared for all the unforeseen events the new year has in store - allowing you to focus on running your business.
From the Garrun Group family, we wish you and your loved ones a happy festive season!