2 out of top 8 business risks in SA directly affect HR
Aon South Africa has surveyed the risk and insurance landscape and HR leaders should pay attention to their findings.
Out of eight major risks that face the South Africa business landscape, two are directly impacted by or related to HR. Namely, the widening skills gap and liability resulting from wrongdoing. The first, which refers to the increased rate of emigration resulting from political uncertainty and fear, is something that impacts the HR profession directly as it directly impacts the size of the local talent pool. The second speaks more to the failures organisational culture and unethical leadership, for which HR also has hand in shaping.
According to Aon, managing risk and costs is imminently more crucial as the interconnectivity of traditional and emerging risks means organisations can no longer evaluate individual risks in isolation but must look at all the top risks and people in a more holistic way.
Here are the eight biggest business risks facing the country according the insurance brokerage and risk advisor.
1 Risk readiness is falling, but volatility is growing - Businesses are slow to implement new risk and insurance programs for evolving risks such as cyber and political risk. Yesterday’s solutions no longer address the risks posed by a technologically, economically and politically fraught environment, so a new lens is needed to mitigate these evolving and serious risks.
2 A widening skills gap and growing social discontent: Political and economic uncertainty are widening SA’s growing skills gap as highly skilled eople emigrate. Furthermore, alarming unemployment rates are fueling growing social dissatisfaction, manifesting in violent service delivery protests which have caused significant losses to private and public property.
3 Political risks: Despite the availability of more data, analytics and mitigation solutions, companies are less prepared for political risk than ever before. Concerns over South Africa’s economy and indeed the world are not going away soon, so organisations should learn from the past as political uncertainty is one of the biggest enemies of business.
4 Cyber risk: With the heavy reliance on technology, businesses are more vulnerable to system failures and data breaches causing business interruption, loss of customers and reputational damage. Any entity – regardless of size or nature of business - that conducts any aspect of its business online and holds sensitive data is a potential target for a cyber breach or hack.
5 Weather catastrophes that intensify with climate change: Property-related and business interruption losses as a result of fire and weather catastrophes have increased dramatically, with 2017 having the highest underwriting losses on record. While weather catastrophes increasingly account for the lion’s share of property and business interruption insurance claims, individuals and businesses remain under-insured for the impact of these uncontrollable risks.
6 Business Interruption (BI): BI has been a Top 10 business risk since Aon’s Global Risk Management survey launched in 2007. As supply chains become globally integrated there is increasing interdependency, while inventory reduction and lean supply chains have amplified the risks of unexpected disruptions to business continuity. Cyberattacks have also added new urgency and dimension to BI. Lloyd’s estimate that cyber-related business interruption could cost businesses around US$400 billion a year.
7 Market volatility drives demand for payment protection: Defaulting debtors are likely to continue in response to weak trading conditions. SMEs are certainly at greater risk as their balance sheets are unlikely to carry them through a major default, while it’s foolhardy to think that big corporates don’t falter as recent business rescues have shown. Accounts receivable is one of the largest uninsured assets on a balance sheet, despite accounting for 40% and more of total company assets. Trade credit insurance is essential to mitigate these credit risks.
8 Directors and other officers’ liability: Companies of all sizes, even non-profit organisations and membership associations need comprehensive cover for liabilities that could arise from wrongdoings by directors and officers in conducting their managerial responsibilities. Statistics over the last decade show that D&O claims against privately-owned SME businesses and non-profits are as prevalent as they are in large listed entities, yet research by Datamonitor suggests that 70% of SMEs do not have any D&O cover despite the increased regulatory scrutiny and litigious nature of society.