Chubb Insurance South Africa’s new Multinational Risk Research Survey, in collaboration with Commercial Risk Africa, has named cyber risk as the top risk facing multinationals in Africa, followed by political and trade credit risk, and terrorism.
The report highlights the key concerns of African risk managers and insurance buyers, with 481 correspondents from key industry sectors in 24 African countries having taken part.
“Despite commodity market instability, Africa remains one of the fastest-growing regions in the world, with South African organisations focusing their growth strategies beyond borders. Yet these new growth strategies are creating complex new risks for organisations which demand sophisticated cross-border insurance solutions,” says Neil Beaumont, Regional Head – Business Development & Major Accounts – Eurasia & Africa. “The reality is that the insurance environment on the continent is not as interconnected and homogenised from a regulatory perspective as we might wish it to be. With no global standard for insurance regulation or a consistent application of insurance law across borders, a thorough compliance analysis and understanding of local regulations governing insurance and risk is vital.”
The top 10 risk exposures identified in the survey are:
1. Cyber risk (25%)
While cyber is considered an ‘emerged’ risk, a number of businesses are still grappling with how to manage this real and present danger.
2. Political and trade credit risk (19%)
Current political turmoil continues to drive an increase in business indecision, social unrest and riot risk. As businesses continue to expand across borders, they are faced with a number of geopolitical threats such as expropriation, discrimination, political violence, forced abandonment, trade agreements and exchange controls.
3. Terrorism (11.4%)
Recent years have seen an increase in major terrorism events across the world, as attacks in Brussels, London, Madrid, Nigeria, Paris, Tunisia and Turkey have highlighted the growing need for terrorism and political violence cover.
4. Professional indemnity
5. Environmental liability
The rising level of environmental legislation across the globe is putting increased pressure on firms to prove compliance with rules and regulations across all their bases of operations, often with little or no regulatory uniformity across jurisdictions;
6. Fidelity crime
In South Africa, where most respondents are based, employee fraud is a growing concern with insurers experiencing a huge uptick in claims;
7. Business travel
8. Power generation
9. Group personal accident
“It is interesting to note that the top three risks share a number of common denominators, including that each risk is dependent on or perpetrated by a third party and each holds massive financial and operational implications for the business. Interestingly, respondents to the survey believe these same risks will continue to cause exposure in the next three years,” says Beaumont.
The report further illustrates the four key drivers of why companies and risk managers have become more concerned about their overall risk exposure in a multinational setting in the past three years:
- Increasing complexity of international regulatory and compliance requirements (37.9%)
- Increased public scrutiny of corporate behaviour (25.8%)
- Increasing exposure to new trade corridors and patterns (20.7%)
- Increased dependency on overseas earnings (8.6%)
“For organisations operating across a number of different jurisdictions, effective risk management can be challenging. As businesses across Africa continue to pursue growth, one of the main challenges is dealing with the rapid pace of change across Africa’s emerging risk landscape. Partnerships with multinationals will allow African insurers to access the skills, expertise and capacity required to keep up with this ever-changing risk environment and provide impetus for further industry development and diversification. Now, more than ever before, risk managers need to ensure that their organisations are resilient and have the contingency plans needed to grow and thrive in an ultra-connected, complex and high-risk world,” says Beaumont.