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A snap-shot look at risk in the first six months of 2017

It is always valuable and important to do an on-going review of the current risks facing the globe, your country, your business and yourself. This includes the latest global risk trends prevailing and how organisations and businesses around the world are feeling about and perceiving risk.


There are always new risk trends with the latest being the advent of “fake news” which has exploded on the back of technology and social media. This can impact on the image and reputation of businesses of all sizes and have a massive financial impact. Another area that has mushroomed on the back of technology and social media is the use of ransomware. Again this can have a major operational and financial impact on businesses of all sizes. See separate articles on these.

Recent global risk surveys show that there is a big disconnect between government policies and the real world as currently faced by organisations and businesses. Businesses and organisations span the globe in their operations and are increasingly becoming “boundaryless”. On the other hand, governments are becoming increasingly insular and inward looking with a high focus on nationalism and immigration. There are also material differences between first world regions and emerging market countries in respect of key risks.

The latest Allianz risk barometer has the following as its 10 top risks for 2017:

  1. Business Interruption – supply chain disruption and vulnerability
  2. Market Developments – new entrants, intensified competition, volatility, market fluctuation
  3. Cyber Incidents – data breaches, cybercrime, IT failure
  4. Natural Catastrophes – storms, floods, earthquakes
  5. Changes in legislation and regulation – Govt change, protectionism, economic sanctions
  6. Macroecomic developments – deflation, inflation, austerity programs
  7. Fire, explosion
  8. Political risks and violence – war, terrorism
  9. Loss of reputation or brand value
  10. New technologies – interconnectivity, drones, artificial intelligence, nanotechnology


Notable major risk concerns in emerging markets were fraud/theft and corruption and a lack of appropriate skills.

The following are a short summary of some of the larger risk events that occurred during the first quarter of 2017 both locally and internationally.

Socio-economic and Political –

Locally –

  • SA in a technical recession (two consecutive quarters of negative growth)
  • SA Ratings Downgrade to sub-investment and the firing of ministers Gordhan and Jonas and continued political uncertainty, resulting in currency volatility with the possibility of interest rate increases in the near future on the expected/anticipated downgrade by Moody’s
  • On-going lack of governance in Eskom, SABC and other State Owned Enterprises
  • Difficulty of parastatals/SOE’s being able to tap into bond market for funding given pending investment downgrade and higher yield required
  • SA business confidence remains very low on back of a lack of political leadership, no clear economic policy and widespread allegations of state capture, corruption and racketeering
  • Economic recession could last for around two years after the downgrade
  • Growth outlook for South Africa bleak – 1.1% at best – down .7% in first quarter of 2017 – retail space very subdued with low consumer confidence, significant slowdown in the SA consumer environment particularly in discretionary clothing spend. Unemployment at 28%.
  • Continuing political unrest in South Africa – widespread violent protest action countrywide largely in respect of housing demands and poor service delivery
  • Violent strike and protest action by workers in a number of sectors – including taxi strikes and mass action
  • Communities demanding jobs from major employers operating in their communities or towns
  • Weak demand outlook for Platinum Group Metals
  • Pioneer Food SA – cancellation of their off shore acquisition on the back of increased off shore borrowing costs and complications driven by the SA downgrade and country risk
  • Introduction of steel import tariffs
  • General Motors putting local operations up for sale
  • Avian flu spreads to some chicken farms resulting in hens having to be destroyed.
  • Anglo Gold Ashanti announces the reduction of 8000 jobs in the mining industry


Internationally and regionally –

  • First 100 days of Trump’s presidency of USA – new policy concerns and turmoil on the back of firings, Russian meddling and security issues, economic growth outlook unclear on back of uncertain tax cuts/reforms and Obamacare
  • Brexit uncertainties
  • US /China trade relations uncertainty
  • French elections- win by young newcomer representing new political movement, along with growth in right wing who took 34% of the vote
  • Emerging markets – some positivity but global trade uncertainty could dampen growth – trend of nationalism and protectionism, rising global interest rates and policy uncertainties in major markets
  • Global terrorism and threats continue – ISIS, al Qaeda, al Shabaab, boko haram
  • Syria – US and Russia uncertainty
  • North Korea/South Korea tensions around on-going missile tests
  • Terrorist attacks – UK – parliament terror attack kills 5, UK – terrorist attack in Manchester kills 22, UK – London Bridge/Burrough market terror attack – 17 dead many seriously injured, UK – Finsbury Park mosque terrorist attack – 1 dead, Sweden – terrorist attack with truck driven into a store, Mali – terrorist attack on luxury resort in Bomako
  • Political unrest and uncertainty – Venezuela – 12 weeks of on-going unrest and protest – 67 killed – continued collapse of the economy – inflation running at 300% – food and water shortages, Zambia – economy remains highly vulnerable to the fortunes of copper price – breakdown of democracy – opposition leader on trial – President declares state of emergency, Central African Republic – armed rebellion with violence in central and eastern part as groups battle- hundreds killed and thousands displaced – United Nations peace-workers killed – sanctions re-imposed by the US,  Angola – long serving president’s health poor – succession issues likely, Lesotho – new Prime Minister’s wife gunned down – political tensions simmering, DRC – elections still not taken place, ruling president Kabila has no “status’, Nigeria – weakening economy on back of depressed oil price and poor health of president,  Ivory Coast – military mutiny and tensions, Kenya – general elections in August on back of chaotic primaries
  • Disease outbreaks – Measles – increasing infections around the world, Kenya – cholera outbreak, DRC – fresh ebola outbreak, Zimbabwe – Avian flu virus hits farms.
  • Refugee issues – Migrants continue to flee Syria and Libya heading for Europe, Kenya and Uganda – major pressure from the massive number of Sudanese and Somalian refugees in camps
  • Middle east – Palenstine situation remains unresolved
  • Brazil – continued aftermath and economic fallout from on-going government corruption and bribery scandals- currency and equity markets down over 9%
  • Angolan and Mozambique economies continue to struggle under weak oil price
  • Qatar – severance of diplomatic ties by UAE, Saudi Arabia, Maldives, Egypt, Yemen and Bahrain
  • Tanzania – ban of export of gold and copper concentrate from the country
  • Zimbabwe – chronic shortages of cash, succession tensions remain, national airline banned from entering European air space for safety reasons.


Financial –

  • Sanlam – acquisition of a majority stake in the life and general insurance Soras Group of Rwanda in 2014 has highlighted the presence of extensive fraud by the vendors which only became apparent long after the acquisition. These were some manipulation of the financial statements on which the transaction was based when they acquired the business. Sanlam also discovered irregular practices in Soras’ general insurance business – Soras Assurances Générales (Soras AG) – toward the end of 2015.
  • Johnson & Johnson was hit with its largest jury verdict yet in the ongoing lawsuits alleging its baby powder causes ovarian cancer, as a St. Louis jury awarded a woman a record-setting $110.5 million. This comes after three previous St. Louis juries doled out a total of $197 million to plaintiffs making similar claims. There are currently around 2,000 lawsuits pending in state and federal courts over alleged health problems stemming from prolonged talcum-powder use. The company said in a statement that it would appeal the decision, and that it would “continue to defend the safety of Johnson’s Baby Powder.”
  • Aspen fined Euro5.5 million for pricing transgressions by Italian authorities
  • Credit Suisse – the banking group finalised its settlement agreement of $5.3 billion with the Justice Department following a U.S. investigation into the bank’s sales of toxic mortgage debt before the financial crisis.
  • MTN – impending fines in Rwanda
  • Sasol – Sasolburg’s Natref refinery explosion resulted in evacuation and production loss
  • Spur Group – consumer backlash and boycott from one sector of consumers following the handling of the racial altercation in a store
  • The impact on balance sheets from the downgrade of South Africa’s rating – higher cost of debt, capital losses on bonds
  • Adcock Ingram – R2m fine for contravening Competition Act by virtue of a pre-implementation merger
  • Commodity price volatility – oil, copper, gold, coal, iron ore has wide economic impact
  • Impact of both ransomware attacks and fake news
  • Takata Corp – files for liquidation on the back of legal claims from major auto manufacturers
  • Sears – to close a further 20 more stores on the back of the 254 already announced in the US as Canadian Sears closes 59 stores – citing increased disruption from on-line stores and falling sales



  • British Airways – failure of outsourced IT system resulting in total disruption to bookings and flights with knock on implications to both Heathrow and Gatwick airports
  • BMW – supply failure of steering linkages by Bosch resulting in major production disruption to assembly operations in a number of countries and assembly plant shut downs
  • Metrorail – two major train accidents as a direct result of operator failure to comply with operational controls, procedures and protocols
  • Sasol – explosion at Secunda refinery
  • Ship crashes into Bidvest port crane infrastructure in Durban harbour rendering it inoperable for months



  • Fake news becomes a serious reality which has to be managed as it can have major financial implications for businesses and organisations
  • Aspen – has been accused by European authorities (April 2017) and particular censure by Italy, of manipulating and fixing the prices of certain cancer drugs as well as the destruction of excess stocks of cancer drugs. This has raised numerous questions around its corporate governance and ethics. In addition to its reputation being tarnished, it now faces censure and possible fines by regulatory authorities.
  • Net 1 – on-going negative publicity associated with payment of Sassa grants by subsidiary CPS, Constitutional court ruling around tender irregularities and supposed unauthorised deduction of amounts from Sassa accounts.
  • Ford – on-going challenges in South Africa with Kuga model due to poor handling of fire issue and recall. Company since announced that they are exiting South Africa.
  • United Airlines – bad publicity and boycotts on the back of overbooking of flights and physical removal of passengers which went viral on social media
  • Uber – resignation of CEO Travis Kalinack following shareholder revolt as a result of a number of adverse scandals and employee treatment and company culture issues
  • Termination of service provision by banks, accountants, sponsoring brokers and PR firms associated with the Gupta group of companies – “association risk” too high
  • KPMG – SA branch under review by Accounting Professions council following exposures in its accounting treatment of certain transactions by Gupta linked company
  • Bell Pottinger – have appointed highly regarded legal firm to undertake a review of its activities and conduct in light of its association with the Gupta group and the adverse publicity
  • Mckinsey – Embroiled in Trillian Eskom sub contracting scandal
  • SAP – embroiled in commission kick-back scandal to Gupta controlled company around Transnet contract
  • Chairperson elect of Alexander Forbes steps down in light of his role as CEO at KPMG when irregular payments and accounts of Gupta controlled company were signed off under his watch.



  • Nova Nordisk – lack of product diversification from core insulin drug business resulting in sudden massive deterioration in the company’s performance.
  • Barclays – disposal of 22% of Barclays Africa Group – branding and trademark issues
  • Disruptive technologies accelerate – low priced sensors, augmented reality, virtual reality, deep learning, mobile internet/4G/LTE, wi-fi, Bluetooth, touchscreens, MP3, lithium batteries, cloud computing, 3D printing, containerisation
  • Amazon buys Whole Foods for US7bn dollars
  • Tencent hit with concerns and criticism around need for self regulation of child addiction
  • Volvo announces that it will stop making internal combustion engines by 2020


Environmental and Physical Threats –


  • South Africa – warnings that country could be faced with el-nino conditions later this year and likely poor rainfall in many areas (Probability of an El Nino event mid-2017 greater than 50% according to IRI and CPC)
  • Average temperatures in southern part of the country have risen 2 degrees in the past 100 years
  • Drought situation in Western Cape and water crisis
  • Massive storms and winds hit Cape Peninsula killing eight
  • Fires hit Knysna, Sedgefield and Plettenberg Bay areas destroying hundreds of structures and killing 7


  • Floods – the southern eastern part of Zimbabwe, UK – east coast flooding, Cyclone Debbie hits Queensland coast – floods in Rockhampton water 8.75 metres high, Peru – floods and landslides – 67 dead, Thailand floods -18 dead
  • Cyclones, Typhoons and Tornadoes – Cyclone Debbie hits New Zealand town, Tornadoes hit South and Midwest USA, US Gulf Coast – tropical storm Cindy threatens – torrential rains likely to cause damage and effect oil production, Bangladesh – Cyclone Mona about to strike, Philippines – typhoon Nina brings high winds and rain
  • Earthquakes – Earthquake in the Caribbean, Earthquake of Chile coast
  • Fires – London- massive fire in Grenfill 24 story high rise apartment block killing 80 and wounding many others. Inferior cladding materials found in hundreds of council buildings, China – devastating fire in crèche, Bush fires in New South Wales, Portugal – bushfires Pedrogao Grande kill 62, Wild forest fires devastate Chilean towns
  • Avalanches/Sinkholes/landslides/mudslides – Afghanistan- avalanche destroys homes, Massive sinkhole in Michigan USA, Columbia – landslides  – 254 dead,  Italy – avalanche hits hotel killing 29, Sri Lanka – over 100 killed in mudslides following torrential rains
  • Heatwaves – UK – hottest day in June on record, US – Arizona – temperatures of 48 degrees resulting in roads buckling and animals/wildlife being severely impacted, Australia – New South Wales and Queensland
  • Diseases/outbreaks – West Africa – Ebola virus, South Africa/Zimbabwe and Mozambique – malaria outbreaks
  • Move to alternative energies and to smart energies away from oil
  • Over-fishing and exploitation of fish resources off the West coast of Africa

Technology/Cybercrime –

  • Google Docs – criminal hackers launched a particularly crafty play to worm into Gmail accounts and gain access to accounts. Users got an email from someone they actually knew. The message looked every bit like every other offer users would have had from a co-worker to share a Google Doc. Once clicked on it took users to a page giving “Google Docs” permission to manage the user’s emails and other Gmail features. Google said it squashed the scam within an hour of detecting it.
  • The growing threat of Artificial Intelligence (AI) – while robotics and AI have the ability to transform the world around us, they also pose a serious threat and risk to jobs and privacy. The interaction between machines and people will become more fluid and personalised as artificial intelligence becomes more advanced and adapts to individual needs. While the applications based on AI are already visible in healthcare diagnostics, targeted treatment, transportation, public safety, service robots, education and entertainment, it will inevitably gain prominence in other fields in the years ahead.
    Read more: https://www.nasdaq.com/articles/artificial-intelligence-growth-opportunities-and-threats-2016-10-04
  • Ransomware – fresh attacks, notably the WannaCry and Petya global attack which locked access to user files for demands of money in the form of the virtual currency Bitcoin
  • Fake News – use of fake bloggers, commentators and twitter users to promote agendas
  • Social engineering – employees passing on IT systems and data confidential information
  • Johannesburg Municipality – sabotage of billing system
  • Oakbay/Sahara Computers – hacking and disclosure of e-mail content linked to Guptas and alleged State capture
  • Use of drone technology and potential abuse of this by terrorist groups
  • Growth in crypto currencies such as bitcoin
  • Increase in coboting – being the use of robots to make jobs easier
  • Al Jazeera claimed it has been hacked
  • Petya virus cyber attack hits businesses in Russia and the Ukraine spreading to Rumania and the Netherlands, Norway, France Spain, Great Britain then India and the USA impacting some major firms likeWPP, Rosneft, Merck, Cadbury’s and AP Moller-Maersk – inability of impacted businesses  to get unlock encryption keys to release code is preventing firms from paying the ransoms demanded
  • National Security Agency – contractor working for Booz Allen Hamilton in major data theft scandal


Governance/ Regulatory and Legal –

  • 17 banks including international banks with local operations in South Africa have been implicated in collusive rand dollar trading and face fines of 10% of Turnover
  • South AfricanAirways (SAA) hit with a R1.16bn anti competitive fine
  • Aspen, Pfizer and Roche to be investigated for fixing of cancer drug prices
  • Strategic Fuel Fund SA – totally dysfunctional board – there has finally been formal disclosure of the irregular sale of “oil” reserves.
  • Johnston and Johnson – US Justice Department has opened an investigation concerning management and advisory services provided to rheumatology and gastroenterology practices that bought its drugs.
  • Net 1 – major Governance and Ethical Issues around Sassa grant payments. CEO and founder stepping down on the back of pressure from major shareholders
  • Multichoice DSTV – R180 million fine for price fixing
  • Barclays and four former executives charged with conspiracy to commit fraud for providing false information to Qatari investors during emergency fund raising activities
  • Barclays – current boss Jess Staley faces a regulatory investigation into revelations by the lender earlier this year that he breached rules designed to protect the anonymity of whistleblowers.
  • Co-owner and president of the now-closed New England Compounding Center in Framingham sentenced to 9 years for skirting cleanliness standards resulting in deadly meningitis outbreak which killed 76
  • Alphabet/Google – EU regulators fine the company 2.4bn Euro for monopolistic behaviour
  • Uber – European Union to pronounce on taxi registration requirements
  • SA – new mining charter gazetted. Highly contentious due largely to non–engagement with key stakeholder Chamber of Mines and revised indigenous ownership requirements
  • SA – Mr Price – National Credit regulator issues
  • SA – Impending changes to Competition Act
  • SA – Beef producers being investigated by competition authorities
  • SA – Rooibos being investigated for anti-competitive behaviour

Crime – Fraud, Criminality and Corruption –

  • A financial accountant in the employ of MTN has been charged with fraud (April 2017) for stealing nearly R24 million over a period of two years from the company. This was simply done by making regular payments to a beneficiary account which was effectively in her personal name. Her employer was notified by a bank of the potential fraud after large unexplained credits were made to her bank account.
  • The third year anniversary of the Justin Bieber concert robbery at the FNB stadium and the lessons that can be learned from this. While the robbery remains unresolved, investigations have revealed a glaring lack of vetting and background checking of staff employed in the cash handling process, weak controls and lax procedures
  • Ransomware attacks by both known and unknown parties (Wannacry worm virus)
  • Corruption rampant across all tiers of government and state enterprises
  • Anti-competitive behaviour and price fixing across a number of industries- fines of 10% of turnover
  • E-mail revelations of wide spread state capture and corrupt activities by the Guptas
  • Life Esidimeni – deaths of mentally ill patients following removal of patients and placement in private unqualified and unregistered NGO establishments
  • Fraudulent claims in both short term and life industry continue unabated
  • ID theft syndicates obtaining credit from various retailers
  • Sibanye Gold (Cooke shaft) – illegal miners (zama-zamas) operating in its mine shafts. Collusion between underground mine workers and zama-zamas including the providing of food
  • Truck carrying electronic goods valued at R50million hi-jacked after tracking device jammed


   HR –

Locally –

  • Continued issues around non-compliance with BBBEE legislation
  • Risk of employing government officials who were suspended but not yet formally charged for financial irregularities and who then resign and move into the private sector
  • The lack of vetting of teachers and educators against data bases and perpetrator registers
  • Strike action in a number of sectors

Internationally/Globally –

  • Increasing automation and artificial intelligence threatening jobs and causing labour unease
  • Increase in independent contractors – focus on completing tasks rather than filling jobs
  • Need to create more diverse and inclusive workplaces
  • Brexit – potential impact due to possible relocation of businesses to Europe from London and restrictions on some workers
  • US policy – restriction on foreign nationals and likely impact on skills pool in some industries like technology