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Businesses globally need to prepare for rise in social unrest, warns Allianz

THE United Nations has warned of the destabilising potential of disrupted supply chains and surging food, fuel and fertiliser prices, particularly in the context of Russia and Ukraine representing around 30 percent of the world’s supply of wheat. Photo, David Ritchie.

THE United Nations has warned of the destabilising potential of disrupted supply chains and surging food, fuel and fertiliser prices, particularly in the context of Russia and Ukraine representing around 30 percent of the world’s supply of wheat. Photo, David Ritchie.

Published Jun 15, 2022

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Businesses needed to prepare for a rise in social unrest incidents as the cost-of-living crisis followed hard on the heels of the Covid pandemic, Allianz Global Corporate & Specialty (AGCS) yesterday warned.

While South Africa is not among the 37 countries with high projected levels of unrest in the next six months, it was among several major markets, that sits just outside the ‘perfect storm’ category, the insurer said.

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Several major markets, including India, Brazil, Russia, South Africa, Indonesia and Turkey, sat just outside the ‘perfect storm’ category.

However, while the risks for South Africa were slightly less acute, but they would remain significantly elevated.

According to the Verisk Civil Unrest Index Projections, 75 countries would likely see an increase in protests by later this year 2022, resulting in, for example, a higher frequency of unrest and more damage to infrastructure and buildings.

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The outlook was most bleak for the 34 countries that face significant deterioration by August 2022. More than a third of these states are in Europe and Central Europe (12), followed by the Americas (10), Africa (6), Middle East and North Africa (3) and Asia (3).

Research identified 37 countries with both a low level of recovery capacity and high projected levels of unrest in the next six months. These included the important emerging markets of Nigeria, Pakistan, Bangladesh and Ethiopia, which faced a ‘perfect storm’ of popular anger as protests driven by the pandemic’s economic fallout inflamed unrest over pre-existing grievances.

With confidence in traditional sources of information and leadership being undermined, the role of social media platforms in activating civil unrest was becoming increasingly influential.

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Strikes, riots and violent protest movements pose risks to companies because in addition to buildings or assets suffering costly material damage, business operations could also be severely disrupted with premises unable to be accessed, resulting in loss of income.

Srdjan Todorovic, the current head of Crisis Management, UK and Nordics, at AGCS Political Violence & Hostile Environment Solutions, said civil unrest increasingly represented a more critical exposure for many companies than terrorism.

“Incidences of social unrest are unlikely to abate any time soon, given the aftershocks of Covid-19, the cost-of-living crisis, and the ideological shifts that continue to divide societies around the world. Businesses need to be alert to any suspicious indicators and designate clear pathways for de-escalation and response, which anticipate and avert the potential for personnel to be injured and/or damage to business and personal property,” Todorovic said.

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The United Nations has warned of the destabilising potential of disrupted supply chains and surging food, fuel and fertiliser prices, particularly in the context of Russia and Ukraine representing around 30 percent of the world’s supply of wheat.

Economic and insured losses from previous protests have been significant, creating significant claims for companies and their insurers.

South African riots of July last year, which followed the arrest of former president Jacob Zuma and were fuelled by job lay-offs and economic inequality, caused damage worth R50 billion.

Best practices for how companies should prepare for or respond to such civil unrest incidents depend on many factors, including the nature of the precipitating event, proximity of location and the type of business.

NWU Business School Prof Raymond Parsons said that what was important now was that South Africa in general, and business in particular, should have absorbed the key lessons of the widespread civil unrest in this country in July last year.

“Just as the government is now overhauling its intelligence services to better anticipate any future violent protests, businesses must review their business contingency plans to deal with consequences for them of civil unrest incidents,” Parsons said.

“We must accept that South Africa, along with many other countries, is living in a much more uncertain and risky world which requires additional strategies to manage successfully. Businesses therefore need to update their contingency plans, especially around supply chain vulnerabilities. The better equipped a business is to cope with any civil unrest, the more the costs of civil disruption to the economy can be minimised.”

To defuse economic pressures at the macroeconomic level in SA, Parsons said the effective and visible implementation of both short and long term policies that promote job-rich growth was required.

He said this meant that obstacles to efficient social delivery must continue to be steadily removed and the implementation of agreed policies and projects be urgently expedited.

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