Critical infrastructure blackouts have emerged as the number-one risk for businesses in South Africa for the second consecutive year, highlighting the severe impact of power outages and the failure of essential infrastructure such as ports, railways, roads, and more on the economy and businesses.

This is according to the 2024 Allianz Risk Barometer – an annual business risk ranking compiled by Allianz Group’s corporate insurer Allianz Commercial, and other Allianz entities. It incorporates the views of 3 069 risk management experts in 92 countries and territories, including CEOs, risk managers, brokers, and insurance experts.

The report highlights that cyber incidents and business interruption continue to hold the second and third spots, respectively. While the energy crisis – closely interlinked with infrastructure blackouts – has climbed from sixth place in 2023 to fifth place this year. 

"South Africa's business community must remain vigilant in the face of critical infrastructure blackouts. The persistent threat of power outages and infrastructure failures poses significant business challenges, disrupting supply chains, and impacting the overall economy,” said Thusang Mahlangu, CEO of Allianz Commercial South Africa.

“The report underscores the urgent need for investment in infrastructure resilience and the development of contingency plans to mitigate the potential consequences of blackouts. By proactively addressing these risks, businesses can enhance their ability to withstand disruptions and ensure continuity of operations.”

Big issues

Allianz Commercial CEO, Petros Papanikolaou, pointed out that the top risks and major risers in this year’s Allianz Risk Barometer reflected the big issues facing companies around the world right now – digitalisation, climate change and an uncertain geopolitical environment.

“Many of these risks are already hitting home, with extreme weather, ransomware attacks and regional conflicts expected to test the resilience of supply chains and business models further in 2024. Brokers and customers of insurance companies should be aware and adjust their insurance covers accordingly.”

He added that the same risk concerns united large corporates, mid-size, and smaller businesses. They are all mostly worried about cyber, business interruption and natural catastrophes.

However, the resilience gap between large and smaller companies is widening, as risk awareness among larger organisations has grown since the pandemic with a notable drive to upgrade resilience, according to the Allianz Risk Barometer.

Conversely, smaller businesses often lack the time and resources to identify and effectively prepare for a wider range of risk scenarios and, as a result, take longer to get the business back up and running after an unexpected incident.

Mitigation measures

Natasha Perry, GM of SATIB Insurance Brokers, told Tourism Update: “One of the key findings is that cyber incidents are the top risk for the tourism and hospitality industry, followed by business interruption, pandemic outbreak, natural catastrophes, and climate change.

“These risks are interrelated and can significantly impact the operational, financial, reputational, and legal aspects of a tourism or hospitality-related business.”

Perry provided a few examples:

• A cyber-attack can compromise a company’s data security, disrupt its online booking system, expose it to liability claims, and damage a brand’s image.
• A pandemic outbreak can cause travel restrictions, cancellations, reduced demand, and health and safety issues.
• A natural catastrophe can destroy property, infrastructure, and supply chain, as well as affect customers and employees.

She pointed out that business owners must be able to identify, assess, and manage these risks effectively.

Fortunately, there are ways for tourism companies to mitigate these risks through:

• Cyber insurance: This covers losses arising from cyber-attacks, such as data breaches, ransomware, denial of service, phishing, fraud, and extortion. It also provides access to cyber risk management tools and services, such as cyber security audits, incident response teams, legal advice, and public relations support.
• Business interruption insurance: This covers loss of income due to an interruption or interference with the business operations caused by an insured event, such as fire, flood, storm, earthquake, or civil unrest. It also covers additional expenses incurred to resume or maintain your normal business activities.
• Natural catastrophe insurance: This covers physical damage to property or assets caused by a natural catastrophe, such as windstorm, hailstorm, flood, earthquake, landslide, or volcanic eruption. It also covers loss of income due to the interruption or interference with the business operations caused by the natural catastrophe.
• Climate change insurance: This covers physical damage to property or assets caused by climate change-related events, such as rising sea levels, coastal erosion, droughts, heatwaves, wildfires, or extreme weather. It also covers loss of income due to the interruption or interference with the business operations caused by the climate change-related events.

“These are just some examples of how transferring the risks identified by the Allianz Risk Barometer 2024 can help protect our hospitality and tourism business community,” said Perry.

“Of course, there are many other risks that you may face in the tourism and hospitality industry, such as liability claims, thefts, vandalism, accidents, injuries, illnesses, or regulatory changes.”