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Global Risks Coming to Africa PRODUCTION: DAVID NAPIER
Marsh is the ‘biggest broker on this continent and the biggest risk advisor in the world’, and its insurance products and services are known globally for their quality. But a new set of risks has been identified and Marsh is working hard to ensure its clients continue to operate uninterrupted. 2 / www.enterprise-africa.net
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Earlier this year, the Marsh & McLennan group of companies partnered with the World Economic Forum to release its Global Risks Report 2018. This report suggested environmental risks, economic uncertainty and cyber threats are some of the most feared for 2018. The authors suggest that readers develop ‘a more rigorous exploration of potential sources of value destruction, greater strategic agility to match a rapidly evolving market context, and sharper contingency planning for unexpected events’ while all the time remaining cognisant of underlying threats that have become the norm. This changing landscape, accepted to have a new and everchanging risk profile, is a challenge for the private and public sector. Insurers
are now under pressure to come up with innovative and effective products to meet the needs of a changing consumer base. In Africa, these ‘new’ risks enter the market at a time when regulation, consumer protection, talent pools, awareness of insurance and vastly differing political and economic environments are already creating an industry fraught with challenges. Last year, Enterprise Africa spoke to Marsh South Africa CEO, Spiros Fatouros about how the business was adapting to a shifting insurance landscape and he said that, at that point, the economy was the big concern. “Customers whether large corporate or midmarket, have felt the economic pinch and this has put pressure
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// WE REMAIN HEAVILY INVESTED IN THE CONTINENT, WANTING TO SERVE OUR CLIENTS WHEREVER WE CAN // on us in terms of finding value for clients, determining premium spend, where they can reduce that cover, and how they can better manage their risks within their financial constraints,” he said. But now, in 2018, after a successful year end for the county as a whole (reporting 3.1% GDP growth in the fourth quarter), Marsh and Fatouros are focussing on the findings promoted in the Global Risks Report 2018. “The big issue which is at the fore at the moment is our recently released Global Risk Report for 2018. If you look at the differing risks from 2017 to 2018, obviously extreme weather conditions has become a key issue across the globe – particularly in South Africa with our current water crisis in Cape Town. One of the key risk issues from some executives, mainly from a Northern Hemisphere perspective, is cyber risk and cyber terrorism and we’ve seen the insurance industry respond by issuing policies to cover exposure, and by building advisory networks and response teams to help clients deal with cyber-attacks if and when they occur.” Marsh takes a holistic approach to its cyber assurance portfolio and, rather than managing one element of a very complex risk profile, the company offers a comprehensive and quantitative tactic designed to cover all needs which can include brand and reputation damage, regulatory scrutiny, stakeholder dissatisfaction, and financial losses. “The product has been around
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for some years but it is now gaining a better understanding and traction with clients,” says Fatouros. “Cyber risk is on the agenda for all major Boards and that is something that has changed significantly in the last 12 months.” Cybercrime is no longer solely the responsibility of the IT department – it effects everyone within an organisation. And the intangible nature of any cyber-attack is nothing to scoff at. The Global Risk Report cites the example of state-onstate cyberwarfare as a trigger of something much more serious which could disrupt much more than business activity. “Imagine that a country’s critical infrastructure systems are compromised by a cyberattack, leading to disruption of essential services and loss of life - the pressure to retaliate would build rapidly, potentially setting off an escalatory chain reaction.” Fortunately, Marsh is wellpositioned. In Europe, Marsh was named Winner of the Advisen 2014, 2015 and 2016 Best Cyber Risk Broking Team, and has been recognised for its expertise in the sector which is estimated to cost the global economy $445 billion each year. With the onset of the Internet of Things (IoT) and ever-increasing levels of connectivity, the threat of digital breakdown and cyber-attacks continues to require invention and forward thinking from companies, individuals and insurers. “Risks will continually evolve,” admits Fatouros. “If you look at certain exposures or a certain risk class, it might not fundamentally change but there might be new components to it. If you look at commercial crime, for example. The policy has evolved over time and now there is a big drive to bring social engineering into the policy – and that is effectively revolution rather than reinvention. Then there are new risks such as cyber which has
Spiros Fatouros - CEO
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developed, and we need to come up with new solutions. The unbanked and uninsured across the continent remain, and we must find out how the develop distribution to these groups and help them to unlock the value that insurance can provide them with.” AFRICA In 2017, Marsh was on a growth drive, looking to build on its success in Africa by expanding on the continent through further acquisitions. The group had previously solidified its position in Africa by completing a number of high profile mergers and takeovers, and this strategy looks set to continue but Fatouros will not single out any potential suitors at this time. “From an African expansion perspective, we continually look for opportunities to grow,” he says. “Our footprint hasn’t changed in the past year and we haven’t made any further acquisitions but we continue to look at opportunities and we remain heavily invested in the continent, wanting to serve our clients wherever we can. We continue to follow our clients from South Africa north into Africa and we service many multinationals that have offices all
over the continent. We are always looking at each individual country to decide where there are opportunities to expand our footprint. We are always identifying target countries and opportunities where we see they fit both our expanding Africa client base and corporate strategy. “Historically, Marsh has always had the view that if we want to go into a new territory it makes sense to be the Number One or Number Two there, and then look for local acquisitions to match our appetite for expansion.” The explosion of population, business and commercial activity over the past few decades has resulted in major opportunities for insurers who can scale quickly but deliver first-class service. In 2011, Marsh acquired the brokerage business of South Africa’s Alexander Forbes in 11 African countries for R809 million. Two years later, Marsh acquired the Alexander Forbes Risk Services operation in Uganda before also taking the Alexander Forbes insurance broking operations in Botswana, Namibia, Malawi, Uganda and Zambia. Soon after, Marsh purchased Nigerian insurance broker Femi Johnson & Company. Globally, the company has
// THE BENEFIT FOR OUR CLIENTS IS THAT THEY ARE DEALING WITH THE BIGGEST BROKER ON THIS CONTINENT AND THE BIGGEST RISK ADVISOR IN THE WORLD // made a number of major acquisitions, strengthening its position in all territories, driving group revenues to $13 billion annually. “As a global organisation, there are opportunities all over the world and we need to decide where we can gain the greatest value for the global business,” explains Fatouros. “We look at things like you would with any acquisition – what is the fit, the macro factors, and the synergies – it’s a deep thought process. “As an organisation, we have 1300 colleagues in Africa 800-900 in South Africa, and the benefit for our clients is that they are dealing with the biggest broker on this continent and the biggest risk advisor in the world.” He cites the continental opportunities in agriculture, power and infrastructure as major gateways for growth. “As Marsh we position ourselves to help clients and governments unlock those investment opportunities are remove the risk that can’t be managed, and benefit society from a wider perspective by encouraging entrepreneurship and investment.” 2018 AND BEYOND As Marsh continues to excel in Africa, delivering products and services of unrivalled quality, its key element – people – will remain in the spotlight. The company says it wants to “be a
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magnet for the industry’s best.” When you work for Marsh, you’ll work with ‘a team of diverse professionals across the globe, dedicated to helping clients manage some of the world’s most challenging and complex risks’. “We are a global organisation in 140 countries with around 60,000 people and the mantra of the business is colleagues, clients and growth,” details Fatouros. The company runs a number of learnership and graduate programs in its locations all over the world and takes training and development very seriously. “We understand that we are a business that relies on people, people’s intellectual property and the advice that our people give to our clients so we know we must focus on our people. Our people must focus
on our clients and if we get that right, it will lead to growth. We are a client focussed business and we try to understand what the client’s needs so that we can become a trusted advisor, helping them to see risk as an opportunity and not a drawback. “In Africa and globally across our sister companies we are a business that really understand risks, understands people, and understands strategy.” And now is the perfect time to invest in people and growth. Despite the threats identified in the 2018 Global Risk Report, the economy in South Africa is going through something of a revival following a period of slack growth and, according to the African Insurance Organisation, technology development is helping many uninsured join the market. Fatouros says that, following the
recent governmental overhaul in SA, the industry is feeling buoyant. “There’s no doubt that the change in the Presidency has created huge levels of excitement in South Africa. We’ve had muted consumer confidence for some time, and that has impacted our ability to unlock investment and direct FDI so the mood is very positive at the moment but it is early days. “Business is eager to engage with government and if you look at South Africa, and across the continent and any regions in the world with opportunities for growth - they need to be unlocked and harnessed, but there are definitely opportunities here for growth,” he concludes.
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April 2018
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ALSO IN THIS ISSUE:
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APR IL 2018