Risk Management

Drought’s impact on Western Cape businesses heightens

By: Risk Benefit Solutions

The city of Cape Town has reported that dam levels have increased slightly to 25.4%. While this is positive news, all businesses still need to be acutely aware of the far-reaching effects of the current water shortage in the region.

This is according to Annelie Smith, Corporate Executive at RBS (Risk Benefit Solutions Pty Ltd), an authorised financial services provider who urges people to keep in mind that dam levels and usable water levels are still very low for the region. “The City of Cape Town implemented level 4b water restrictions on 1 July 2017, which effectively allows residents only 87 litres of municipal water per person per day. Businesses will also continue to be negatively affected by the severely limited access to water.”

“Since the implementation of restrictions at the start of the water crisis, we have seen more and more of our clients facing massive challenges. Some businesses in the hospitality industry for example, have reported that they are now unable to provide sufficient water for regular daily operations. As far as tourism is concerned, these businesses cannot sell rooms when they cannot guarantee water for their clients, meaning that many of these businesses are operating at minimum occupancy.”

In the construction sector, we have seen at least one large project in the region that had to be halted due to water constraints, she adds. “Some other businesses have also seriously considered implementing new work-from-home policies in the event that the company finds itself unable to provide enough water for staff kitchens and bathrooms. Depending on the nature of the business, this could negatively affect productivity.”

Business owners need to understand that they cannot rely on their insurance policies to cover losses associated with drought, says Smith. “Insurers do not consider drought an event that directly causes damage to a business and as such, it is not covered. This also applies to “water-shedding”, since most insurance policies for industry will exclude the deliberate withholding of water by the supply authority. Risk management is therefore the only way for a company to protect itself from damage in this case.”

All businesses based in the Western Cape need to revisit their risk management strategies and make sure that the business is prepared to deal with the impact of tighter water restrictions and possible water shedding in future, Smith says.

Companies are strongly advised to calculate the amount of water required to accommodate both their staff, operations and production, says Smith. “Wherever possible, a business should consider storing reserve or greywater. Having a well-planned work-from-home policy in place and having lists of alternate suppliers in case one of the company’s service providers is affected, are also feasible options.”

Businesses need to stay up to date with drought related issues and the impact on the business. “Most importantly, businesses need to involve their broker partners at all levels of the business, to ensure that their business has the best possible chance of outlasting the drought,” Smith concludes.

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