Businesses should brace for rise in civil unrest – report

Businesses should brace for rise in civil unrest – report

With a cost-of-living crisis following hard on the heels of the COVID-19 pandemic, businesses should prepare for a rise in civil unrest incidents, according to Allianz Global Corporate & Specialty (AGCS).

With confidence in traditional sources of information and leadership dropping, the role of social media platforms in sparking civil unrest is becoming more influential, AGCS said. Strikes, riots and violent protests can pose risks to companies because, in addition to material damage to buildings or assets, business operations can be disrupted, resulting in loss of income.

“Civil unrest increasingly represents a more critical exposure for many companies than terrorism,” said Srdjan Todorovic, currently head of crisis management, UK and Nordics, at AGCS (Todorovic will become head of global political violence and hostile environment solutions as of July 01). “Incidences of social unrest are unlikely to abate anytime 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.”

The United Nations has warned of the destabilizing potential of disrupted supply chains and spiking prices for food, fuel and fertilizer, particularly with Russia and Ukraine representing about 30% of the world’s wheat supply.

“All of this is planting the seeds for political instability and unrest around the globe,” UN Secretary-General Antonio Guterres said in March.

Risk consulting firm Verisk Maplecroft sees a rise in civil unrest as inevitable in middle-income countries, which were able to offer social protection during COVID-19 but will now find it hard to maintain that level of spending as the cost-of-living skyrockets.

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According to the Verisk Civil Unrest Index Projections, 75 countries are likely to see an increase in protests by late this year, resulting in a higher frequency of unrest and more damage to infrastructure and buildings. The outlook is most grim for 34 countries that face “significant deterioration” by August, AGCS said. More than a third of these countries are in Europe (12), followed by the Americas (10), Africa (6), the Middle East and North Africa (3), and Asia (3).

Economic and insured losses from previous protests have been significant, AGCS said. In 2018, the Yellow Vest Movement in France formed to protest fuel prices and economic inequality, with French retailers losing $1.1 billion in revenue in only a few weeks. In 2019, large-scale demonstrations broke out in Chile to protest an increase in subway fares, leading to $3 billion in insured losses. In 2020, US protests over the death of George Floyd are estimated to have resulted in more than $2 billion in insured losses.

The influence of social media networks is playing a growing role in mobilizing protesters and intensifying social unrest, AGCS said.

“The unifying and galvanizing effect of social media on such protests is not a particularly recent phenomenon, but during the COVID crisis it combined with other potentially inflammatory factors such as political polarization, anti-vaccination sentiment, and growing mistrust in government to create a perfect storm of discontent,” Todovoric said. “Geography was less of a barrier, too. Those with like-minded views were able to share opinions more easily and mobilize in greater numbers more quickly and effectively. In a world where trust in both government and media has fallen sharply, misinformation could take hold and partisan grievances be intensified and exploited.”

Targets of civil unrest – or collateral damage arising from it – could include government buildings, transport infrastructure, supply chains, retail premises, foreign-owned businesses, gas stations, distribution centers for critical goods, and tourism or hospitality businesses, AGCS said. Companies should review and update their business contingency plans if necessary to consider any supply chain vulnerabilities. They should also review their insurance policies in the event of increasing local unrest activity, the insurer said. Property policies may cover political violence in some cases, but insurers also offer specialist coverage to mitigate the impact of strikes, riots and civil commotion.

“The nature of political violence threats is evolving as some democracies become unstable and certain autocracies crack down heavily on dissenters,” Todovoric said. “Unrest can occur simultaneously in multiple locations, as social media now facilitates the rapid mobilization of protesters. This means large retail chains, for example, could suffer multiple losses in one event at various locations in a country.”

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