POLITICAL RISK & TERRORISM - HOW CAN BUSINESSES COPE?
Following the annulment of
the presidential election held on the 8th of August 2017 by the Supreme Court,
Kenya witnesses unprecedented political tension. This has had negative effects
on the economy as most businesses were feeling the crunch from the extension of
the electioneering period. Additionally, it is important to note that
terrorists find unstable governments an easy target, thus making the situation
even worse.
Given the nature of
political risks and terrorism, which are largely exogenous and thus out-with
individual control, businesses cannot patiently sit idle without having
mitigation plans in place. Furthermore, during these periods of political
uncertainty, businesses need to be proactive and take measures to protect their
operations and their employees from potential violence. While the causes of
political risk may be outside your control, there are still precautions you can
put in place to protect against them.
Insurance can provide cover
against damage to buildings, its contents, machinery, equipment, and its
personnel and insurance can preserve gross profits during periods of
disruption. Nevertheless, care is required to ensure that valuation of assets
is carried out prior to inception of cover to prevent cases of over-insurance
or under-insurance, as this could lead to business owners falling victim to
“average clause” following a claim. Additionally, business owners should ensure
that their policies are extended to cover them against risks from political
violence, terrorism, riots and strikes as these are most often excluded from
standard policies.
On their
own, however, insurance covers do not guarantee continuity to a business.
Organizations need to be cognizant of the fact that it takes a while for
insurance claims to be settled, depending on the nature and complexity of the
claim. Additionally, an insurance cover cannot protect businesses from loss of
investor confidence, poor quality standards nor from the negative public
perception which may result from how an organization handles a crisis. To be
effective, businesses are advised to craft a Business Continuity Management
(BCM) plan which will assist in mitigating the crisis’ impact on the company’s
reputation.
The BCM should
include a clear analysis of where your business and its associated branches are
located, who your suppliers are and where they are located as well as who your neighbours
are. An incident happening at your neighbour’s premises will most probably have
an impact on you as well. An incident interrupting operation of your main
supplier will ultimately have repercussions on your business as well.
Organizations that prepare well in advance not only survive from such
disruptions, but they also benefit as a result of converting the risk they face
into an opportunity. Planning for the unexpected will not take away the risk,
but it will create working procedures that allow an organization to respond
effectively during a crisis period.
BCM planning basically
covers two main processes:
First is contingency
planning, which gives businesses the tools required to deal with the
immediate effect of the disruptive incident. This could include evacuation of
the building, or coordination with emergency service providers.
Second is crisis and recovery
management, which is the process by which an organization manages
reinstatement to a fully operational business, including effective communication
to all interested parties to ensure they are aware of what is happening and
when the organization will be back in business.
To conclude, businesses are advised to
craft a targeted BCM plan and to conduct ongoing exercises to
validate the plan in order to uncover potential (training) needs within the
organization. If you get your planning right, your work will probably go
unnoticed as the organization will continue running smoothly even in times of
crisis. However, if you get your planning wrong, the whole world will end up
watching…
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