‘Don’t scrimp on short-term insurance cover’

Remaining competitive is one of the biggest challenges faced by the logistics sector, which may lead some to reduce costs in vital areas such as short-term insurance cover. But in the long term this could prove to be crippling, says Eikos Risk Applications. The company has identified three major risks for 2014 for which it urges logistics service providers to create sustainable risk management solutions. Weak currency A weaker rand may be welcomed by the export sector as the weaker exchange rate reduces the cost of South African products in dollars but it’s a nightmare for importers, says Eikos. A weak rand contributes to higher inflation rates, steep fuel costs and higher goods prices, factors which undermine both importers and exporters. Civil unrest It is not just the mining sector that has been directly affected by strikes. According to the state-owned specialist risks insurer Sasria, it has seen an increase in claims costs arising from strikes and labour unrest from about R200 million in 2011/12 to almost R600 million in the 2012/13 financial year, and these came from many different business sectors. Road and border risk The supply chain continues to face risks related to delays at border posts and damage to vehicles caused by unroadworthy roads. A report recently published by the World Economic Forum entitled ‘Outlook on the Logistics & Supply Chain Industry 2013’, stated: “If countries were to be more ambitious and improve their border management and transport-related infrastructure services to attain 50% of the global best practice level (as observed in Singapore), global GDP would jump up by 4.7% – six times more than what would result from removing all import tariffs.”