Top 10 biggest risks to business in South Africa in 2020

Allianz Global Corporate & Specialty (AGCS) has published its latest business risk barometer, ranking the things that businesses around the world, including South Africa, perceive to be the biggest risk to their operations over the next 12 months.

The barometer is based on a global survey that incorporates the views of 2,718 experts in over 100 countries including chief executives, risk managers, brokers and insurance experts.

Cyber incidents ranks as the top peril for companies globally, receiving 39% of responses.

Seven years ago cyber risk ranked only 15th with just 6% of responses. Awareness of the cyber threat has grown rapidly in recent years, driven by companies’ increasing reliance on their data and IT systems and a number of high-profile incidents, Allianz said.

“Businesses face a growing number of cyber challenges including larger and more expensive data breaches, an increase in ransomware and business email compromise (spoofing) incidents, as well as the prospect of litigation after an event.

“Political differences between nation states being played out in cyber space brings added risk complexity, while even a successful merger or acquisition (M&A) can result in systems problems. And as companies collect and use ever greater volumes of personal data, breaches are becoming larger and costlier,” it said.

Dealing with a mega breach (involving more than one million records) now costs $42 million (R600 million) on average – up 8% year-on-year. Breaches in excess of 50 million records cost $388 million (R5.6 billion) on average – up 11%.

Following cyber incidents, the next biggest risk identified by businesses are Business Interruption (37%), Changes in legislation and regulation (27%), Natural catastrophes (21%), and Market volatility (21%).

South Africa

Cyber incidents (46% of responses) ranks as the most important business risk in South Africa, relegating perennial top peril at a global level, Business interruption (BI) (40% of responses) to second place.

Cyber incidents ranked number one in 2016, 2017 and 2018 in South Africa.

“Cyber incidents rises to the second top regional risk – and the top risk in South Africa – while companies are also more worried about changes in legislation and regulation, which remains at 3rd,” said Thusang Mahlangu, CEO AGCS Africa.

“The top risks in South Africa match the top three global risks, which shows African businesses have similar concerns as other companies around the world. Businesses across Africa are also increasingly concerned about business interruption as it has become the continent’s top risk in 2020 from 5th in 2019,” he said.

Changes in legislation and regulation (ranked 3rd in South Africa with 29%) and Climate change (ranked 6th with 19%) are the biggest climbers globally underlining the US-China trade war, Brexit and global warming as increasing concerns for companies and nations including South Africa, Allianz said.

A new entry to the South African top 10 is something that all South Africans will be familiar with – load shedding – which has climbed the risk rankings to 5th place.

“South Africa is experiencing short-lived boom bust cycles. The power issue is the main trigger since the output capacity constraint is increasingly binding. This led to the downside in Q3.

“Along with lower access to power, energy-intensive sectors such as mining, manufacturing, construction and transport contracted. As a result, GDP growth should remain very low, since a solution to the overall power issue has not been found yet,” said Stéphane Colliac Senior Economist for France and Africa at Euler Hermes.

These are the biggest risks to South African businesses:

Read: Municipalities prepare schedules for stage 8 load shedding

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Top 10 biggest risks to business in South Africa in 2020