Allianz: The increase in strikes, riots and protests is testing business resilience

Companies worldwide would be wise to remain vigilant about the threat of strikes, riots and civil commotion (SRCC). In addition to causing costly property damage to buildings or assets, they can severely disrupt operations, resulting in significant loss of revenue according to insurance firm Allianz Global Corporate & Specialty (AGCS) in a new report.

“Incidences of SRCC have not only increased in recent years, but have become more intense and catastrophic. These types of events make our era one of uncertainty,” said Srdjan Todorovic, Head of Terrorism and Hostile Environment Solutions at the insurer.

“We have seen multibillion-dollar events in America, Chile, and Colombia. The threat is changing, and although many of the reasons for it are universal – whether economic, political, or environmental – it plays out differently in different regions, with various levels of violence and disruption. Those responsible for operational and security management within organizations should view the current climate as a catalyst for evaluating best practices and policies related to preparing locations and employees for potential civil unrest and building up resilience.”

Growing risk of civil unrest

According to the Verisk Maplecroft Civil Unrest Index, the risk of civil unrest rose in more than 50% of countries between the second and third quarters of 2022; out of 198 countries, 101 saw an increase in risk. Since 2017, more than 400 significant anti-government protests have broken out worldwide. Not surprisingly, ‘political risks and violence’ is a top 10 risk in the 2023 Allianz Risk Barometer. While the war in Ukraine is an important factor in this ranking, the results also show that the combined impact of SRCC activities, which together account for a total score of nearly 70%, is the political violence risk of most concern. Unrest is now spreading faster and more widely, thanks in part to the stimulating effect of social media.

Moreover, the financial costs are rising because such events also last longer; nearly a quarter of the 400 major protests against governments since 2017 lasted longer than three months. Just six events of civil unrest around the world between 2018 and 2023 are reported to have resulted in approximately $12 billion worth of damages and losses.

Five risk drivers of civil unrest

In its report, Allianz highlights the five main factors expected to drive SRCC activity. The first factor is the continued rise in the cost of living. Although inflation is now believed to have peaked in many countries, the after-effects continue to take their toll. Just over half of the protests in 2022 were triggered by economic issues, and public confidence in the financial future is shaky. In half of the countries surveyed in the 2023 Edelman Trust Barometer, there has been a sharp decline in people’s belief that their families will be better off in five years’ time.

Distrust of governments and institutions is the second driver. Economic grievances about food, fuel, wages or pensions may spread from issues-led demonstrations to broader 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 affected by numerous strikes over pay and working conditions. Political instability in Peru, Brazil and Argentina has also led to widespread and violent protests.

Increasing polarization and activism

The third factor is increasing polarization. Political divisions around the world are creating tensions that undermine social cohesion and escalate conflict. Polarized opinions can take hold, especially on social media platforms, and in some countries that polarization turns violent. There has been a major shift to the left and the right in many countries in recent years, with few liberal democracies maintaining a sense of balance and political parties competing for the middle ground.

The fourth factor is a rise in activism. Movements that have been significantly galvanized by social media in recent years include the 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 is polarized, people can feel a greater sense that their personal values are under attack and take to the streets to defend them,” Todorovic said. When this turns into violence and opportunism, businesses can be vulnerable to property damage and looting.

Climate and environmental problems

The fifth factor that can drive civil unrest is climate and environmental concerns. Unrest can arise where governments are seen to row back on climate-change progress, such as fracking or reopening coal mines as a solution to dependence on Russian gas. Businesses deemed to be profiting excessively from fossil fuels while many people are struggling could also be targeted. “We expect these types of activities to continue, if not escalate, in the coming year,” stated Etienne Cheret, Regional Practice Group Leader Crisis Management at Allianz.

Implement, test and revise continuity plans

Civil unrest can be difficult to predict because it often begins with a specific trigger, such as a change in government, new legislation or a sudden increase in prices. However, there are many things companies can do to minimize disruptions, according to the insurer. Allianz Risk Consulting has therefore compiled a list of recommendations for businesses, such as implementing and then regularly testing and revising a business continuity plan.