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Despite Possible Revamp, Macro Economy, Market, Others Top Business Risks In Africa – Expert

With the risks posed by macro economy; market development as well as high level of corruption over the years in the country, Nigeria has been certified to possess the human potential to check the devastating impacts of the sharp practices on the country as well as largely revamp the socio-economic sectors on a long term.

Speaking at a press briefing in Lagos on Allianz Risk Barometer 2016; top 10 Business Risks in Africa and Middle East, the CEO of Allianz Global Corporate & Specialty (AGCS), Africa, Delphine Maidou admitted “corruption is everywhere”.

She established that she has always been inclined to Nigeria, as she realized it is blessed with people who have crave for “innovation”, as well as always willing to learn and grow.

According to her, many businesses in Africa are facing a growing number of challenges which threaten their profitability and possibly also their business models.

“Businesses constantly have to be on their toes, turning out new products, services or solutions in order to stay relevant to the customer and to thrive in this rapidly changing and globally competitive environment” the Africa AGCS boss asserted.

Maidou said the fifth annual survey – Allianz Risk Barometer indicated that the top three leading risks for businesses in Africa and Middle East include: “macroeconomic developments with (44%); market developments (44%) and changes in legislation and regulation (32%)”.

Yet, she established the survey showed that political risks (war, terrorism and upheaval) rank higher than any other region, adding that the area was the only one to rank power blackouts (10th) in the top 10. The Allianz boss noted that the risks were emerging for the first time in Africa and Middle East.

Maidou made reference to Ludovic Subran, Chief Economist at trade credit insurer Euler Hermes, who said “The biggest contraction in global trade since the financial crisis, BRICS and other emerging markets hitting a wall and a subdued knock-on-effect from the drop in commodity prices help ensure market and macro developments rank highly in this year’s Risk Barometer.”

The Insurance expert according to Maidou mentioned South Africa, Brazil, Russia, Nigeria and Malaysia as among those countries which have been negatively affected by cheaper commodity prices, just as sectors such as construction have not done as well as anticipated because of structural difficulties.

Maidou who sits on top of the Insurance giant which surveyed over 800 risk managers and insurance experts in over 40 countries including Nigeria, declared business interruption BI as the top risk for businesses globally for the fourth year in succession.

Many companies she also noted are concerned that BI losses, which usually result from property damage, “will increasingly be driven by cyber-attacks, technical failure or geo-political instability as new “non-physical damage” causes of disruption”.

According to her, the two major risers in the year’s Allianz Risk Barometer “feature in the top three corporate risks for the first time with market developments ranking second and cyber incidents third” adding that cyber incidents were also cited as the most important long-term risk for companies in the next 10 years.

Ironically, natural catastrophes (third in Africa and Middle East) Maidou disclosed dropped two positions to fourth year-on-year, saying this was a proof that in 2015 losses from natural disasters reached their lowest level since 2009.

As many industrial sectors are presently undergoing a fundamental transformation, Maidou observed as insurers “we need to work together with our corporate clients to help them to address these new realities in a comprehensive manner.”

On how to tackle market environment, Maïdou stated: “more than a third of responses (34%) cited market developments such as intensified competition or market volatility/stagnation as one of the three most important business risks in 2016, ranking this new survey category as the second top peril overall. Market developments are a particular concern in the engineering, financial services, manufacturing, marine and shipping, pharmaceutical and transportation sectors, where this risk ranks among the top three business risks respectively. In addition, this risk ranks as a top two concern in Europe, Asia-Pacific and Africa and Middle East.

“Innovation cycles are becoming rapidly shorter; market entry barriers are coming down; increasing digitalisation and new ‘disruptive’ technologies have to be quickly adopted while potentially more agile start-ups are entering the game.”

On cyber-attacks, Maidou disclosed the risk has increasingly become area of concern for businesses globally and it areas include cyber-crime or data breaches, as well as technical IT failures.

“Cyber incidents gained 11 percentage points year-on-year to move from fifth position (fifth in Africa and Middle East) into the top three risks for the first time (28% of responses). Five years ago, cyber incidents were identified as a risk by just 1% of responses in the first Allianz Risk Barometer.

“Loss of reputation (69%) is the main cause of economic loss for businesses after a cyber-incident, according to responses, followed by business interruption (60%) and liability claims after a data breach (52%)” AGCS stated.

The multinational stated the “businesses need to prepare for a wider range of disruptive forces in 2016 and beyond; the increasing impacts of globalization; digitization and technological innovation” pose fundamental challenges.

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