The city of Johannesburg came to a standstill as a result of the heavy rain experienced in the region at the beginning of March, more than double the usual average for the month in less than two weeks. According to John Kerby, Corporate Accounts Director at RBS, these erratic weather patterns highlight the need for businesses across the country to implement stringent risk management policies, as it seems that traditional seasonal weather patterns are no longer dependable.
Kerby says that many business owners suffered millions of Rands worth of loss as a result of damage to property, loss of income due to business interruption and vehicle and fleet damage. “Should these businesses not have the correct cover in place it is unlikely that they are able to survive these losses.
“The recent unexpected and extreme weather patterns also highlighted the range of risks businesses are exposed to daily. These risks are extremely diverse and specialised, depending on the sector in which a business operates in. Such incidences have resulted in the term ‘risk management’ taking on a significantly new level of importance, especially as the country continues to witness changing weather patterns.”
He says as businesses in the Western Cape will soon face the usual extreme winter conditions, it is of utmost importance for businesses in the area to review insurance and risk management policies, in order to avoid the extreme losses that their counterparts in Gauteng recently encountered.
Kerby explains that there are some instances that a business is unable to manage or predict the risks over a period of time and this then calls for the business to cover every possible eventuality, which includes considering the focus and depth of the cover needed.
As an example, Kerby points to a recent announcement by Sun International during this period that due to the on-going rain and flash floods experienced at Sun City, the Gary Player Country Club, as well as the Lost City Golf Course were to remain closed for seven days due to extensive structural damage to both courses.
“In the case of a golf course, a loss of revenue would be experienced from having to both refund players for games booked that week, as well as not being able to accept new business. There could also be knock-on losses for associated facilities, such as for the establishment’s accommodation and food and beverage departments as a result of this occurrence. The establishment would also face the cost of having to repair property damage sustained by the weather.
Kerby says regardless of the business’s field, poor risk management policies may leave an organisation vulnerable to major long-term setbacks, or even worse, insolvency and bankruptcy. “Incorrectly structured policies and incorrect business interruption calculations could mean the business is underinsured, so it is advised that businesses consult an expert when putting these policies in place.
He says that while a business may manage to survive an initial loss as a result of business interruption, continued loss of revenue from the second, or perhaps third interruption could be detrimental to revenues. “It is crucial that the correct policies are put in place by businesses, regardless of the sector they operate in or size of business, and that the correct calculations are done in terms of depth and focus to ensure that the business is sufficiently covered,” concludes Kerby.