Risks facing businesses on the rise, says insurance specialist

Annelie Smith, Corporate Executive at RBS.

Business decision makers’ / executives’ / owners’ main objective is to satisfy clients’ needs and deliver on company promises. In order to do so effectively, a company needs to operate efficiently at all times. However, with companies increasingly facing a growing number of risks, both anticipated and uncontrollable, decision makers are taking strain and businesses are being adversely impacted.

This is according to Annelie Smith, Corporate Executive at Risk Benefit Solutions (RBS), who says that the economic landscape is changing rapidly, and as a result business owners are encountering new risks in their operating environment which they are not adequately prepared for.

“Executive boards are increasing putting pressure on business decision makers, specifically Chief Financial Officers (CFOs), to ensure that the various risk management, regulatory and compliance measures are in place and adhered to.”

This pressure is only compounded as local companies seek growth opportunities elsewhere in the continent as South Africa’s economic growth slows, says Smith. The Deloitte 2015 CFO Survey revealed that 84% of Southern African companies cited growth as the top reason for investing in sub-Saharan Africa.

“Over the past 3 years, we have noticed a growing need for reliable cover across Africa and the Globe by local based companies. To meet this demand, we have partnered with WING, a global network that enables RBS to expand its international reach and global expertise in providing co-ordinated, integrated insurance and risk management solutions to businesses operating on a global stage.”

She explains that across Africa, the risks vary greatly and without hands-on-the-ground expertise, the risks unique to a certain market can easily be miscalculated or misinterpreted, potentially causing a detrimental impact on the business.

Smith points to the CFO Survey as an example of how risks are perceived differently depending on region and point of reference. For South African CFOs investing in East Africa, key challenges identified include in-country political factors, a shortage of skills, regulation and infrastructure, currency volatility and logistics among their top five challenges. While CFOs operating in West Africa cite logistics, regulation, economic stability, in-country political factors and infrastructure as their most pressing challenges.

Meanwhile the 2016 Allianz Risk Barometer ranked macroeconomic developments - such as austerity programs, commodity price increase, inflation/ deflation – in the top 10 list global risks (placed 6th) for the first time, and as the top risk in the Africa and Middle East region.

“With the most recent terrorist attack in Brussels, the risks associated with terrorism is also rapidly rising. Reports also show that terrorism in Africa is steadily on the rise due to militant activity, and can’t be ignored by businesses.”

Smith says that faced with the statistics at hand, a focused and comprehensive enterprise risk management strategy is vital to a company’s survival and ability to grow.

“This becomes a key tool in assisting a company in achieving its business objectives. An enterprise risk management strategy will not only limit a company’s risk exposure, but also assist in utilising the opportunities that may arise. In other words, by introducing innovative solutions, it enables senior executives to concentrate on growing the core business instead of worrying about their cover and whether they are protected from risks.”

Smith stresses that when expanding outside of South Africa, it is crucial that businesses partner with an accredited and knowledgeable suppliers, as if the incorrect supplier is hired, this can easily become another challenge they will have to navigate.

“While there is no concrete plan to completely avoid risks, there are measures to minimise the impacts of these risks. Business insurance has evolved into more than just processes and systems, and into a new arena of difference approaches and strategies. Decision makers should be making use of these strategies to ensure cost effective solutions that are clear and easy to implement,” concludes Smith.