Hot newsRisk Management

Managing crisis with expert help

Allianz

Five years on from the events of the Arab Spring the geopolitical environment in Africa and around the globe continues to be volatile. More countries are experiencing situations, which can pose huge challenges for companies’ staff and assets.

COVER attended a discussion by Allianz on their Crisis Management service where Global Crisis Management expert, Christof Bentele, spoke about the geopolitical outlook in Africa and the globe and how companies operating on the continent can prepare and respond better to crises.

Christof Bentele, Head of Global Crisis Management at Allianz Global Corporate & Specialty, is based in London. He is one of the leading experts globally on Product Recall and Contamination, Kidnap and Ransom, Emergency Evacuation, Terrorism and Political Violence.

He used Product Recall as an example of a possible crisis, spending some time on Product Contamination, which can happen due to a variety of reasons:

  • Accidental contamination
  • Malicious tampering
  • Governmental recall
  • Adverse publicity
  • Internationally impaired ingredients
  • Products extortion.

The insurance coverage on a contamination policy runs on a continuum which Christoff see in steps, moving from pre-incident cost, which is aimed at managing possible future incidents, then the actual contamination event, the pre-recall costs, recall costs, mitigation costs and finally rehabilitation costs. Loss of profits start happening when the recall starts.

Christoff shared some statistics, indicating that the US had some 5095 incidents costing billions in lost profits. He explained that, when it comes to product recall, the management of the recall process, from the pre-incident readiness to the rehabilitation, as per the above continuum, is critical in minimising loss of profits.

Christoff then introduced the red24assist team, a global crisis management consulting firm, with whom Allianz has partnered to assist their clients in the event of a crisis. They provide a holistic support service in crisis management and risk mitigation, with a global team of 96 specialists, in areas ranging from microbiology, pharmaceutical, toys and food, to engineering and electrical product safety.

To ensure global expertise in all circumstances red24assist themselves use SGS (various softline testing services), McGuirewoods (global experts in law) and Marketpoint (communication).

Their services can be provided in two categories namely, Risk Mitigation and Response. Risk Mitigation includes crisis management plans, crisis simulation, site risk assessment, legislative compliance and gap analysis tools. The response category includes, crisis team support, independent product testing, public relations and crisis communication, post-incident response and business continuity.

red24assist provided some interesting examples of the main reasons for recall in the food environment, which includes undeclared allergence, bacterial, viral contamination, toxins, spoilage and filth. In many of these instances the management of the crisis and the investigations afterwards were critical in limiting losses.

red24 global risk map 2015

Christoff also discussed Automotive recalls, which have highly sophisticated systemic and retroactive financial exposure. Interestingly, he showed that most problems leading to recall, happens in the first three years of building of the vehicle. Here the most common incidents can be found in safety related issues, emission related issues and non-conformance. However, there are also the area of non-safety critical issues where legally, there are no pressure to recall, but there might be good reason to recall, such as high levels of customer satisfaction issues. Automitive recall cover includes the following costs, recall notices, withdrawal, mantling and dismantling, disposal, warehousing, additional staffing, replacement of the part, defense costs, cost of the product and financial loss.

Finally he looked at Kidnap and Ransom, explaining that the maximum cover offered is 25 million Euros, mentioning that the average ransom payment is only 150m to 200m Euros. Banks usually buy large cover due to their own specific broader exposure, including business interruption. This kind of cover relates to a variety of costs not just limited to paying the actual ransom and repatriation of the person involved.

All in all it became clear that simply having the cover for incidents like Product Recall, Kidnap and Ransom and Product Contamination is just a start to mitigating and managing the possible fallout of such events. Appropriate and effective crisis management is essential and requires specialists across a broader spectrum.

Read more from Christof Bentele in the December issue of COVER, where he explores the above risks in more detail.







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