Naoshi Hirata of
Since
At
An earlier estimate by
More than 19 100 people were killed or missing after
The twin natural disasters also triggered
The closest nuclear plant to
Wednesday, January 25, 2012
Research shows big quake for Tokyo within four years
Evaluating Risk in your Business
Risk management is a catch phrase corporates love and SMEs often ignore – to their detriment.
Business owners who assume that risk management only applies to large corporates couldn’t be more wrong. It’s an area to which large organisations pay a good deal of attention and in which they invest a great deal of money, but in many ways SMEs are more vulnerable to risk than their corporate counterparts.
“The fact is that big corporations are often better able to absorb the effects of risk exposure. Most smaller companies simply do not have the capital to ride out the effects of exposure — one fraud, theft or significant loss of business continuity is often enough to destroy them,” says Wayne Malgas, case manager at Pasco Risk Management.
So while the scale of the risk might be different for corporates and SMEs, the fallout of not managing your business’s risks effectively can be the same or even greater if you’re a small company.
You can only manage what you know and understand, so the first step in proper risk management is to define your business’s risks. Risks can be defined as anything that could cause your business to lose money. While there are industry specific risks, a large percentage of business risks are common to all sectors. These include:
1. Operational risk
Probably the broadest area of risk, operational risk refers to a risk arising from the execution of a company’s business functions. This encompasses people, systems and processes, and includes other risk categories such as fraud, legal and environmental risks. Simply put, it is the risk of loss resulting from inadequate or failed internal processes, people and systems. However, because operational risk is so broad, many of the risk areas that, strictly speaking, fall within operational risk, are managed separately by companies. A good example is IT risk.
2. Credit risk
Bad debt represents a significant risk for SMEs that typically do not have the capital reserves to carry a large debtors’ book. Colin Hill, solution manager – Risk and Financial Crimes, at SAS Institute, points out, “For SMEs, credit risk is often impacted by whether your customers are getting paid by their own customers — if they aren’t, they typically don’t have the cash flow to pay you.”
3. Medical risk
Given the considerable risks associated with having employees who are not covered medically, there is increasing debate about whether companies should make medical cover compulsory. Employees without medical aid are more likely to wait until they are really ill before seeking medical intervention, which leads to more time off work. Their employer is also often the first place they turn to when they need a loan to cover medical expenses.
4. Reputational risk
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently,” said Warren Buffett famously. Social media provides consumers with the power to do lasting damage to your brand, and the Consumer Protection Act has placed consumer rights top of mind.
5. IT risk
Typically IT risk includes loss of data and a break in business continuity when IT systems fail, but increasingly it also refers to the threat from cyber attacks. “We’re seeing a big spike in the cyber threat to businesses,” says Wayne Malgas, adding, “You can be sure that as big businesses increase their security and it becomes more difficult to break into their systems, hackers will look for softer targets like SMEs.”
6. Travel risk
Travel risks include health-related risks but also the often unforeseen risk of corporate kidnapping, particularly for companies looking to expand into volatile African and Asian countries.
7. Compliance risk
“In the past year alone businesses have had to deal with the likes of King III, the Property Act and the Consumer Protection Act,” says Colin Hill, pointing out that even SMEs need to familiarise themselves with the legislation that affects them — and make sure they put the necessary systems in place to comply. “There is no blueprint for risk identification — the most important thing is to have a detailed and intimate knowledge of your business and the environment in which you operate,” says Malgas.
Take care
Most business owners understand their business well enough to make a start at risk identification, while a risk expert can help you ensure you have included any unforeseen risks. A risk management specialist can also help you to put risk management systems in place but ultimately you need to ensure that the capacity for basic risk management is intrinsic to business processes. “It needs to be fully integrated in the daily running of your business. This will help to reduce dependency and contain costs, and ensure a sustainable risk management system for SMEs,” Malgas comments.
Risk identification needs to be chiefly forward-looking. “Yes you can learn from history but if you’re continually looking behind you, you’ll never see what’s about to hit you,” he says.
Costly property-related errors
How to avoid five of the most common mistakes.
Given that the average house price in
This is according to Jenny Rushin, Provincial Sales Manager at ooba,
1. Shop around before securing a bond
Shopping around with multiple banks and negotiating the best deal can make a big difference to your monthly bond repayments.
A bond originator is able to assist by submitting an application simultaneously to multiple lenders, ensuring a greater chance of approval and on the best terms. Originator consultants understand the different credit criteria and requirements of each bank and are able to provide independent advice to potential home owners.
Additionally, duplication of documentation is avoided ensuring fast approvals while benefiting from a single point of contact to manage the entire process. A bond originator’s service is also at no cost to the homebuyer and without any obligation to accept a particular loan sourced.
2. Under-insuring your home and contents
If you’ve made any improvements to your property since taking out your home insurance, it will have changed the value of your home. Significant changes to your house will increase the value it should be insured for, so it’s important to keep your insurer up to date with any changes.
Also, don’t forget your contents insurance as most people often underestimate how much their belongings are worth. If you purchase new furniture or electronics, then you should review your contents policy (at least annually) to ensure that you have adequate cover.
3. Failing to take basic steps to secure your home
It’s all very good and well to have a home contents insurance policy, but if you don’t take the appropriate measures to secure your property, you may find yourself seriously out of pocket if you are burgled.
If your home fails to meet your insurer’s security requirements, then your policy will become void, even if you’ve paid premiums for years. Don’t waste your insurance premiums or, worse, face having to pay to replace stolen possessions. Read your contents policy carefully and ensure your home meets its minimum security requirements.
4. Using a sub-standard contractor
Substandard home improvements can cost SA consumers millions every year and can actually reduce the value of your home, or worse, cause expensive damage. Unfortunately, the process of sourcing a reliable builder and managing a building or renovation project can be extremely stressful, but if done incorrectly can add lasting financial stress for a homeowner.
To safeguard yourself always remember to do a thorough background check on anyone who is going to take a hammer to your home. This includes requesting to see proof of their building credentials which can include memberships such as the Master Builders South Africa (MBSA).
5. Spending on improvements that add little value to your home
Not every improvement will add value to your home. For example, new carpets costing R50 000 add very little value to your property’s overall worth. However, the right paint job can add up to 10% to your home’s value.
Your first home improvement priority should be to ensure the property is structurally sound. Roofing, windows, damp proofing and the electrics should all be in top condition and if they’re not, should be at the top of your home improvement list.
Consumer Act weighs on Mini
The Consumer Protection Act (CPA) has led to an increase in product recalls, with the latest being a recall of approximately 3,350 Minis with faulty water pumps in SA by BMW.
Eric Levenstein, director at Werksmans Attorneys, says that these recalls have occurred since the Act introduced the concept of “strict liability” for suppliers.
“The knock on effect to a company's bottom line caused by significant product recalls should not be underestimated and cannot be ignored by companies in today's economic climate,” he says.
Gas equipment requires Certificate of Conformity
Business owners have to comply with specific regulations when installing gas equipment on their premises, to ensure that their insurance policy remains valid.
According to Regulations that were introduced in 2009, gas installations must have a Certificate of Conformity in terms of the Pressure Equipment Regulations, promulgated under the Occupation Health and Safety Act, 85 of 1993.
While this may sound like a complex, legal document – essentially it is a certificate that states that the installation has been properly inspected and is determined to be safe and leak free.
It is critical that this certificate is also issued by an authorised person who is registered with the Liquefied Petroleum Gas Safety Association of Southern Africa (LPGASA).
According to the Regulations, anybody who has a liquid gas installation installed on their site must have this certificate, which is usually obtained during the installation phase. he onus is on buyers, to ensure that they have this certificate on site, not the installer.
If your place of business, factory or plant is damaged or destroyed, as a result of a defective gas appliance, and you do not have a valid certificate issued by someone registered with LPGASA – the insurance implications could be significant.
An insurance company would be well within their rights to repudiate a claim, which could have severe financial repercussions.
Having the installation inspected and approved is a quick and easy process – provided the installation has been done correctly – much in line with similar requirements for electrical installations, which also requires a certificate of compliance under the OHS Act.
It is vital to realise that such an inspection is not just essential for their insurance policy to remain valid, but even more importantly, that it is conducted to ensure that the installation is safe and your employees are not put at risk.
If a gas appliance has been incorrectly installed and results in a gas leak this could have major health implications for workers, not to mention the huge danger involved of an explosion.
If you suspect your gas appliance is unsafe it is best to turn the appliance off immediately and do not touch it until it has been checked by a registered gas engineer.
To ensure your gas installations are always in top working order ask a registered gas installer to perform an annual maintenance and service check
Thursday, January 19, 2012
80% of South Africans leave expensive belongings in cars overnight
belongings in their cars overnight, not only exposing their motor vehicle to potential
expensive break-ins but also leaving their personal and sometimes irreplaceable
belongings vulnerable to being stolen.
According to Christelle Fourie, Managing Director of MUA Insurance Acceptances, the survey, whichwas conducted on behalf of MUA is particularly alarming given the recent South African
Police ServiceCrime Reportfor201 0, which revealed a 1.8% increase in theft from or out of a motor vehicle.
"For many people, their motor vehicles are an extension of their homes- a place where they feel safe and comfortable. As a result. it is a common mistake made by many to simply leave certain belongings in the car overnight believing that they will be safe until the morning.''
The most common item left in motor vehicles were laptops with 24% of respondents admitting to leaving theirs in their cars overnight. according to the survey conducted by MUA Insurance Acceptances in conjunction with RISKSA. Small electronic devices such as mobile phones or cameras came in second with 22% and GPS devices were the third most common item left
in cars.
"In South Africa, we tend to be far more cautious on the issue of theft and safety, as a result of our high crime rate. However, the reality is that many motorists do still leave belongings overnight in their vehicles, and sometimes on full display to potential burglars.''
Fourie says the types of claims for items that have been stolen from consumers' motor vehicles have increased markedly following the recent criminal 'trend' of thieves interfering with the remote control locking of vehicles. "Motorists press their remotes believing they have locked their vehicle. However, interference- deliberate or otherwise- by third party remotes being pressed at the same time reportedly interferes with the locking process leaving the vehicle open and exposed to petty criminals."
"The problem for the consumer with these cases is that signs of forced entry are usually required by the insurer in order to show that the vehicle was broken into.lf there is no sign of forced entry then the insurer must work on the assumption that the client simply failed to lock the car.ln doing so, any claim would be rejected as the client failed to act with due care and diligence."
Fourie says motorists must be vigilant and ensure that when they leave their vehicle it is securely locked. "Go back to the vehicle to double check. as failure to do this may leave consumers at risk of having a claim repudiated.''
"Unless belongings that have been left behind in a vehicle were hidden from view, it is highly likely that such a claim may be repudiated. In South Africa especially, terms and conditions stipulated by most insurers insist that belongings not be left on display. It is also important that clients are made aware of the fact that this general restriction often applies regardless of
whether the client has unspecified all risks cover in place, as such a theft would be seen as negligence on the part of the client."
Fourie says in order to ensure that a claim will be covered most insurers will insist the motorist stores those items left in an unoccupied car within a locked compartment such as a cubby-hole or boot. "If the vehicle does not have a boot in which bigger items may be stored away, then it is possible that an additional excess will also apply."
"The best advice, however, is to ensure that any expensive and/or sentimental belongings are not kept in a vehicle at all." concludes Fourie.
Concordia claims spread amongst several insurers
The cruise ship Costa Concordia leans on its side Tuesday, Jan. 17, 2012, after running aground on the tiny Tuscan island of Giglio, Italy, on Friday evening. Italian naval divers on Tuesday exploded holes in the hull of a cruise ship that grounded near a Tuscan island to speed the search for 29 missing passengers and crew while the seas remain relatively calm.The search intensified as prosecutors prepared to question the captain, who is accused of causing the wreck that left at least six dead by making a maneuver that the Italian cruise operator said was "unapproved and unauthorized." (AP Photo/Gregorio Borgia)
It’s too early to tell exactly how much insurance firms will have to pay out to cover the damage due to the capsizing of the Costa Concordia, but analysts have estimated that claims could total at least $500 million. One went as far as to say the total bill for insurers could reach $1 billion
“We would be surprised if any single player had more than 5% to 10% of the risk,” Numis analyst Nicholas Johnson wrote in a note. He said the risk is similar to that of the Deepwater Horizon oil spill, where no one company had more than 2% of the total insurance liability.
Costa’s parent company, Miami-based Carnival Corp., which operates 101 ships under several brands including Carnival, Cunard, Holland America, Princess and Seabourn, did not respond to requests for an interview about its insurance coverage. But the company is responsible for at least $40 million in insurance deductibles.
For the insurance companies, it is also too early to tell the extent of their liability. A lot depends on if the ship can be repaired or not.
Carnival has two different types of insurance policies that would cover the $500 million to $1 billion in claims from the Concordia.
Hull Insurance
This insurance covers damage to the ship. Carnival is responsible for the first $30 million in damage. The rest is covered by a network of insurers led by XL Group, an Irish insurer with executive offices in Bermuda. A company spokeswoman refused to comment.
German insurer Allianz Global said it has a “minor stake” in the Concordia claims. A third firm, London-based RSA Insurance Group is liable for up to $15 million, according to an industry source. Other yet unnamed companies also will have to pay out claims.
Chicago-based Aon Corp. brokered the hull insurance deal but a company spokeswoman refused to comment.
“The amount of this hull claim will heavily depend on whether the ship can be salvaged and repaired or whether, in the worst case, the wreck will have to be disassembled on site,” Allianz said on its website.
Liability Insurance
The second type of insurance coverage purchased by Carnival is for personal injury liability. The company said in a statement Monday that it has a $10 million deductible on that policy. That coverage would include any payments related to the cost to clean up any leaking oil, the loss of cargo, and any injuries and deaths of passengers and crew. At least 11 people died in the accident with nearly two dozen others still missing.
Claims would be paid out even if the ship’s captain is found to be negligent. The cruise company has said that Capt. Francesco Schettino deviated from his approved course. Later, an Italian coast guard officer ordered Schettino back on the ship to assist in the rescue.
Cruise lines and shipping companies join together in groups, known as protection and indemnity clubs, to spread out their individual risk. Each member of the club pays in dues and then claims are paid out from the collective funds.
Carnival insured the Concordia through two clubs. The first, which has the bulk of the liability, is the Standard Club, according to a spokesman for the group. The second is through a club called Steamship Mutual. After Carnival pays its $10 million deductive, these two clubs are responsible for the next $8 million in combined liability claims.
The next $52 million in claims would be paid out by a larger collective called the International Group P&I Clubs, which represents 13 of the clubs, which insure more than 90% of the world’s ocean shipping.
After that, there is a reinsurance policy taken out with large firms that would cover losses up to $3 billion, according to the Standard Club. Reinsurance companies protect insurance firms against catastrophic losses. Carnival did not take out insurance for loss of use of the ship. The company said it expects to lose from $85 million to $95 million in bookings.