Capital Equipment News spoke to Russell Davis, Property Manager – Aon Broking Centre, along with Sphamandla Stemela and Tshepo Mofubetsoana from Aon’s Construction and Engineering Division, to unpack the critical risks facing South Africa's transportation and construction sectors. They also explored the tailored solutions Aon offers to address these challenges.
The rising tide of risks in transportation and logistics
The transportation and logistics industries are grappling with an evolving risk landscape. Cyber-attacks, economic slowdowns, and supply chain failures rank as top concerns. According to Russell Davis, the heightened risk environment stems from various global crises, including the COVID-19 pandemic and geopolitical conflicts. “Infrastructure supporting trucking and logistics is rapidly deteriorating in many places,” Davis notes, highlighting the pressing challenges of business interruption and supply chain failures exacerbated by South Africa’s struggling ports, railways, and roads.
Adding to these issues is the prevalence of cargo theft, which is at a 10-year high. Social media and advanced technologies enable bad actors to target high-value goods such as electronics and consumables. “Social media has made it easier for criminals to identify opportunities, making cargo theft a major risk factor,” Davis warns. He emphasises the importance of tailored marine insurance solutions in safeguarding valuable cargo and assets against such risks.
Construction: A sector under siege
In South Africa's construction industry, risks such as underinsurance, contractual disputes, and the so-called “construction mafia” are creating significant challenges. Sphamandla Stemela highlights an alarming trend where cost pressures lead subcontractors to secure minimal insurance coverage. “There seems to be a misinterpretation of how liability is triggered, leading to scenarios where contractors operate without adequate coverage,” he explains. This exposes companies to legal battles and financial losses.
Defects in design also pose a severe threat, with significant implications for safety and reputation. Tshepo Mofubetsoana points out the necessity of professional indemnity cover for engineering professionals, stating, “Defects in design can result in costly legal liabilities and severely damage the reputation of construction companies.”
Another growing concern is cash flow or liquidity risk. The construction sector is infamous for its long payment cycles, creating a knock-on effect that disrupts subcontractors and suppliers. As Mofubetsoana explains, “Slow payments increase the risk of defaults and disputes, often leading to costly legal battles.”
Aon’s tailored insurance and risk management solutions
Aon offers a comprehensive suite of solutions to help businesses in transportation and construction manage their unique risks effectively:
- Customised insurance policies
Aon designs bespoke insurance policies tailored to meet the specific needs of its clients. For the transportation sector, marine insurance plays a pivotal role. “Understanding the nature of the cargo being transported and its value is critical,” says Davis. Aon ensures policies account for all points in the supply chain, covering potential risks such as theft, damage, and business interruption. - Contractual liability and risk transfer
For the construction sector, Aon provides expert guidance on contractual risk transfer. Mofubetsoana explains, “By structuring contracts to assign risks to the parties best equipped to manage them, businesses can reduce disputes and protect their interests.” Aon also educates clients on the importance of including clauses that address emerging risks like civil unrest and defects in design. - Business continuity planning
Both sectors benefit from Aon’s expertise in business continuity management (BCM). These plans help businesses prepare for and respond to disruptions caused by adverse events, from natural disasters to cyber-attacks. Davis highlights that “real-time tracking and monitoring systems can further fortify businesses against external threats.” - Risk engineering and analysis
Aon employs advanced risk engineering techniques to identify and mitigate potential vulnerabilities. From assessing supply chain solvency to evaluating cyber risks, Aon’s data-driven insights provide clients with a robust foundation for decision-making. - Comprehensive coverage for specialised needs
Stemela stresses the importance of ensuring coverage for specialised equipment in the construction industry, such as yellow metal machinery. “Each piece of equipment must have specific, bespoke coverage, accounting for its replacement value and operational context,” he advises. - Cybersecurity measures
Recognising the increasing threat of cyber-attacks, Aon provides cyber insurance solutions alongside actionable analytics. These help companies bolster their defences against vulnerabilities created by digital transformation.
The future of risk management
Looking ahead, businesses must adopt proactive measures to navigate an increasingly complex risk landscape. Comprehensive risk assessments, real-time monitoring systems, and robust BCM plans are key strategies. Mofubetsoana advises industry leaders to foster partnerships with experienced brokers to ensure their policies are tailored to their unique risks. “The right broker can offer insights into current trends, ensuring that businesses remain resilient amidst evolving challenges,” he concludes.
In transportation, the adoption of technology-driven solutions, such as advanced tracking systems, will be critical. “Organisations must integrate actionable analytics into their decision-making processes,” Davis notes. This, combined with cyber security best practices, will fortify businesses against emerging threats.
The transportation and construction industries play pivotal roles in South Africa’s economy. By addressing their unique risks with comprehensive insurance and risk management strategies, companies can safeguard their operations and ensure long-term sustainability. Aon’s expertise in tailoring solutions to these sectors provides a valuable resource for navigating the challenges ahead.
