Business Resilience Will Be Tested

Anger over social inequality and the cost of living, among other factors, is expected to fuel strikes, riots and civil commotion around the world.

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Anger over growing social inequality and the cost of living, foundering faith in governments and institutions and increasingly polarized politics, together with a rise in activism and environmental concerns, are expected to fuel strikes, riots and civil commotion (SRCC) around the world, according to a new report from insurer Allianz Global Corporate & Specialty (AGCS). The heightened SRCC risk environment means businesses need to remain vigilant about the different threats. In addition to buildings or assets suffering costly material damage, operations can be severely disrupted, resulting in significant loss of income.

Strikes, riots and civil commotion have not only increased in recent years, they are also becoming more intense and catastrophic. These types of events are making our era one of uncertainty. We have seen multibillion-dollar loss events in the U.S., Chile and Colombia. The threat is changing, and although many of the reasons for it are universal – whether economic, political or environmental – it can play out differently in different regions, with various levels of violence and disruption. Operational and security management within organizations should view the current climate as a catalyst for evaluating best practices and policies around preparing locations and employees for potential civil unrest and building resilience.

Civil unrest risks rose in over 50% of countries between Q2 and Q3 2022 alone, according to the Verisk Maplecroft Civil Unrest Index -- out of 198 countries, 101 saw an increase in risk. Since 2017, more than 400 significant anti-government protests have erupted worldwide. It is unsurprising then that political risks and violence" ranks as a top 10 peril in the Allianz Risk Barometer in 2023. While the Ukraine war is a major factor, the results also show that the impact of SRCC activity ranks as a political violence risk of top concern with a combined score of almost 70%. 

Unrest is now spreading more quickly and widely, thanks in part to the galvanizing effect of social media. This means multiple locations can be affected, potentially resulting in multiple losses for companies. Such events are also lasting longer -- almost a quarter of the 400 significant anti-government protests since 2017 exceeded three months – helping to ensure financial costs are mounting. Reported damages from just six civil unrest events around the world between 2018 and 2023 resulted in at least $12 billion in economic/insured losses.

See also: The Cost of Uncivil Discourse

Five risk drivers of civil unrest

In the report, AGCS’ political violence team highlights the five main factors they expect to power further SRCC activity in 2023 and beyond:

The cost-of-living crisis: Although inflation is now thought to have peaked in many countries, the effects continue to take their toll. Just over half of protests globally in 2022 were triggered by economic issues, and public confidence in the financial future is shaky. Half the countries surveyed in the 2023 Edelman Trust Barometer showed a year-over-year, double-digit decline in the belief that their families will be better off in five years. Further protests are likely, and although mostly peaceful, they can turn violent.

Distrust of governments and institutions: Governments thought to be corrupt or perceived to have been in power for too long can bring people out onto the streets. Economic grievances about food, fuel, pay or pensions can expand from issues-led demonstrations to wider 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 U.S. and COVID restrictions in China. Europe continues to be hit by multiple strikes over pay and working conditions. Political instability in Peru, Brazil and Argentina has also resulted in widespread and violent protest.

Increasing polarization: Political divisions are stoking tensions around the world, undermining social cohesion and escalating conflict. Polarized opinions can become particularly entrenched on social media, and in some countries such polarization is turning violent. Recent years have seen a big shift to the left and the right in many countries, with few liberal democracies maintaining a sense of balance where political parties compete for the center ground.

A rise in activism: In recent years, movements that have been significantly galvanized by social media include the global 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 U.S. President Joe Biden. 

Where politics are polarized, people can feel a greater sense that their personal values are under attack and will take to the streets to defend them. Riots can erupt as a result around a single flashpoint, such as a heavy-handed response by authorities that is deemed unjust. These can then escalate across a wider area, with larger numbers of people involved, to become civil commotion. If this spills over into violence and opportunism, businesses can be vulnerable to property damage and looting.

Climate and environmental concerns: Where governments are seen to row back on climate-change progress, such as fracking or reopening coalmines as a solution to reliance on Russian gas, there could be unrest. Businesses that are deemed to profit excessively from fossil fuels while many people struggle could also be targeted. 

See also: Cost-of-Living Crisis and Civil Unrest

Implement, test and update continuity plans

Civil unrest can be difficult to predict because it often starts with a specific trigger such as a change in government, a piece of new legislation or a sudden price rise. However, there are many things businesses can do to minimize disruption. Allianz Risk Consulting has developed a list of technical recommendations for companies, such as implementing, and then regularly testing and updating, a business continuity plan. Specialist insurance can help protect companies against damage resulting from political violence, as well as any interruption to the business. Policies can cover civil war, SRCC, terrorism and war.

To read the full report, please visit Outlook: Strikes, riots and civil commotion – a test of business resilience.

Srdjan Todorovic

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Srdjan Todorovic

Srdjan Todorovic is head of political violence and hostile environment solutions at Allianz Commercial.


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