Risk managers conclude political risks top list of concerns for 2015

Commercial Risk Africa has been asking risk managers across the region for their views on a range of risks. Political risks appear to have remained at the top of their list of concerns, with less than 10% of those responding saying the risk has not changed in the past year or has decreased. Political risks include a number of areas, including the risk of politically-motivated violence and riots, foreign exchange rates, sanctions and regulatory risks. However, risk managers say uncertainty caused by forthcoming elections or the risk of governmental change is the main cause for concern. Uncertainty is impacting the willing-ness of foreign investors to commit to certain countries they say.hidePolitical risk also includes the risk of corruption, with risk managers in Nigeria, Kenya and South Africa all citing corruption as an ongoing risk to their businesses. Not only is it impacting the daily operations but also the appetite of investors. In South Africa, Terry Booysen, Executive Director, CGF Research Institute, put political uncertainty and instability at the top of his list of risks, while Nico Snyman, Chief Executive Officer of Crest Advisory Africa, stressed that the problem starts at the top. In Kenya, Agnes Mbaire, responsible for Internal Audit, Risk Management and Compliance at Postbank, said fraud risk remains a major challenge for risk managers operating in Kenya, with Joan Kirika, Head of Risk Management at the Insurance Regulatory Authority, adding that it remains a culture problem. Gilbert Mwalili, Risk Manager at Protecht, also put political risks at the top of his concerns. “In business, people are very quickly affected by political instability. People will react in different ways. One organisation may see it as zero risk, while others see it as a major risk. “The problem is that political risk is so broad.” Peter Mulwa Kioko, Risk Manager at East African Breweries, added: “Political dynamics can change so quickly and it is that unpredictability that causes the risk. It can create uncertainty around regulation or the fiscal framework.” In Nigeria, risk managers admit to nervousness around the impending elections. Adebayo Adebeshin, Risk Manager at MTN Nigeria, saw political agitations and terrorism as one of his top three concerns and fears political risks are rising fast in the country. The decision in February to postpone Nigeria’s presidential and gubernatorial elections—one week ahead of their scheduled date—did not come as a surprise to many observers and participants. The Independent Electoral Commission was already behind on the delivery of newly imported permanent voters’ cards but the announcement that the elections were being postponed because of security concerns was unexpected. Voters will now go to the polls on 28 March for the presidential vote, and on 11 April for the governorships. The elections were set to be a hotly contested race between President Goodluck Jonathan’s ruling People’s Democratic Party (PDP) and opposition from ex-military president General Muhammadu Buhari of the newly formed All Progressive Congress (APC). Last year, PDP had suffered five defections from governors who crossed the floor to join the APC—governors of states that could now potentially split votes. Some civil society organisations criticised government for the postponement and urged voters to not be discouraged and exercise their right to vote. Other analysts were concerned that the delay would lead to tension on the ground. Though there have been spurts of violence during the campaign period, the road to the elections has been mainly calm. Nigerians are concerned about security and want to see a concerted effort to ensure it for the country. During Mr Jonathan’s tenure, Boko Haram has made some of its most horrific attacks, from the kidnapping of more than 200 girls from the town of Chibok in Borno State last April to the mass destruction and massacre of some 2,000 people in Baga in January. President Jonathan’s nonchalant response to both events caused a public outcry, leading to protests across the country calling on government to address these threats. Chief executive of the Lagos-based Financial Derivatives Company, Bismarck Rewane, said the reason government gave for postponing the election—insecurity in the north of the country—is not new and therefore is suspicious. Boko Haram has been carrying out attacks in the country for the past six years. Observers are unsure as to why the government is choosing now to tackle the problem and why the elections need to be put on hold to do so. Boko Haram had captured a few towns in the remote areas of north-east Nigeria, nevertheless there are doubts that the group will be quashed in six weeks. A regional force made up of Nigerian, Chadian, Cameroonian, Beninois and Nigerian troops was inaugurated in February to counter the Boko Haram assault. Analysts Verisk Maplecroft and IHS say Boko Haram’s recent pledge to Islamic Satate follows the government push against the group. Credit rating agency Standard & Poor (S&P) put the country on watch for a potential downgrade in February after the announcement of a later election date was made. S&P said political risk and in particular a low oil price—hovering around $50 per barrel—have affected the country’s economic outlook. In February, the Nigerian currency hit a record low of 200 naira to one dollar.

Risk managers conclude political risks top list of concerns for 2015

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