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Allianz expects rise in strikes, riots and protests to test business resilience

28th February 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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Anger over growing social inequality and the cost of living, floundering faith in governments and institutions and increasingly polarised politics, together with a rise in activism and environmental concerns, are expected to fuel ongoing incidences of strikes, riots and civil commotion (SRCC) around the world, says risk consultancy and insurance multinational Allianz Global Corporate and Specialty (AGCS).

Businesses should view the current climate as a catalyst for evaluating best practices and policies around preparing office locations and employees for the impact of potential civil unrest, it advises.

The heightened SRCC risk environment means businesses need to remain vigilant about the different threats such activity can pose. In addition to buildings or assets suffering costly material damage, operations can be severely disrupted, resulting in significant loss of income.

“Incidences of strikes, riots and civil commotion have not only increased in recent years, they are also becoming more intense and catastrophic. These types of events are making our era one of uncertainty,” says AGCS head of political violence and hostile environment solutions Srdjan Todorovic.

“We have seen multibillion-dollar-loss events in the US, Chile and Colombia. The threat is changing and, although many of the reasons for it are universal, whether economic, political or environmental, it can play out differently in different regions with various levels of violence and disruption.

“Operational and security management within organisations should view the current climate as a catalyst for evaluating best practices and policies around preparing locations and employees for potential civil unrest and building resilience.”

There are five risk drivers of civil unrest globally, including the ongoing cost-of-living crisis. Although inflation is now thought to have peaked in many countries, the after-effects continue to take their toll. Just more than half of the protests globally in 2022 were triggered by economic issues, and public confidence in the financial future is shaky.

Half the countries surveyed in the 2023 Edelman Trust Barometer showed a double-digit year-on-year decline in the belief that their families will be better off in five years’ time. Further protest activity is likely and although mostly peaceful, it can turn violent, AGCS notes.

Distrust of governments and institutions is another driver. Governments thought to be corrupt or perceived to have been in power for too long can bring people out on to the streets. Economic grievances about food, fuel, pay, or pensions can expand from issues-led demonstrations to wider anti-government movements.

“In 2022 and early 2023, protests ignited over the rights of women and minorities in Iran, fuel prices in Kazakhstan, economic failures in Sri Lanka, abortion rights in the US, and Covid restrictions in China. Europe continues to be hit by multiple strikes over pay and working conditions. Political instability in Peru, Brazil and Argentina has also resulted in widespread and violent protest,” AGCS highlights.

Additionally, increasing polarisation is a risk driver. Political divisions are stoking tensions around the world undermining social cohesion and escalating conflict.

Polarised opinions can become particularly entrenched on social media and in some countries such polarization is turning violent. Recent years have seen a big shift to the left and the right in many countries with few liberal democracies maintaining a sense of balance where political parties compete for the center ground, the company says.

Further, there is a rise in activism. In recent years, movements that have been significantly galvanized by social media include the ­global Occupy movement against economic inequality, the Black Lives Matter protests highlighting racial inequality, the #MeToo movement against sexual abuse and harassment, and the Stop the Steal campaign, which falsely claimed electoral fraud in the election of US President Joe Biden.

“Where politics are polarised, people can feel a greater sense that their personal values are under attack and will take to the streets to defend them. Riots can erupt as a result of a single flashpoint, such as a heavy-handed response by authorities that is deemed unjust,” says Todorovic.

These can then escalate across a wider area, with larger numbers of people involved, to become civil commotion. If this spills over into violence and opportunism, businesses can be vulnerable to property damage and looting, AGCS points out.

Additionally, climate and environmental concerns are a risk driver. Where governments are seen to row back on climate-change progress, such as fracking or reopening coal mines as a solution to reliance on Russian gas, there could be unrest. Businesses that are deemed to profit excessively from fossil fuels while many people struggle could also be targeted.

“Environmental protestors made colorful headlines in 2022, such as activists pouring soup on a Van Gogh painting or gluing themselves to roads, and will continue to do so in 2023. Climate change demonstrations tend not to be violent, but they can be disruptive, particularly if they affect transport infrastructure. We expect this kind of activity to continue, if not escalate, in the coming year,” says AGCS crisis management regional practice group leader Etienne Cheret.

Meanwhile, civil unrest risks rose in more than 50% of countries between the second and third quarter of 2022 alone, according to the Verisk Maplecroft Civil Unrest Index, with 101 countries out of 198 seeing an increase in risk. Since 2017, more than 400 significant anti-government protests have erupted worldwide.

Political risks and violence ranks as a top ten peril in the Allianz Risk Barometer in 2023.  In Africa and the Middle East, political risks and violence fell two places to sixth but it is still in the top three risks in Burundi, Madagascar and Nigeria. It remains fourth in South Africa and eighth in Cameroon.

While the Ukraine war is a major factor in this ranking, the results also show that the impact of SRCC activity ranks as a political violence risk of top concern with a combined score of almost 70%. Unrest is now spreading more quickly and widely thanks in part to the galvanising effect of social media. This means multiple locations can be impacted, potentially resulting in multiple losses for companies, AGCS notes.

Such events are also lasting for longer, with almost a quarter of the 400 significant anti-government protests since 2017 in excess of three months, thereby increasing financial costs. Reported damages from six civil unrest events around the world between 2018 and 2023 resulted in at least $12-billion in economic or insured losses. Insurance claims from South African riots in July 2021 cost $1.9-billion.

Specific incidences of civil unrest can be difficult to predict because they often start with a specific trigger such as a change in government, a piece of new legislation or a sudden price rise. For example, violent unrest in the relatively stable West African nation of Senegal in 2021 was sparked by the arrest of an opposition politician on rape and insurrection charges.

“One of the regions that we are most watchful of at the moment is North Africa. It is highly dependent on wheat imported from Ukraine and Russia and is exposed to price shocks in food and energy. We have seen a democratic backslide in Tunisia, which is significant, as it was the cradle of the Arab Spring and widely believed to be the region’s success story in terms of democratic transition,” says Todorovic.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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