Load shedding losses can be moderated with effective risk management planning

George Davis, Head Construction and Engineering at Risk Benefit Solutions.

George Davis, Head: Construction and Engineering at Risk Benefit Solutions (RBS), an independent insurance and risk specialists, advises this after Tshediso Matona, chief executive of Eskom, yesterday announced that South Africa should brace itself for more load shedding for the next 12-18 months, until two new power stations are operational.

"The roll out of load shedding has already resulted in an outcry from various industries after Eskom, at the end of November, declared a power emergency for larger industrial business, and requested a 10% reduction in electricity usage," says Davis.

Companies that deal with cold storage are a key example, as a prolonged period of no electricity will result in stock losses as the produce expires. "While some businesses will have an insurance policy in place to cover business interruptions, some policies do not cover long periods without electricity, which have negative consequences in terms of stock loses. While there are more sophisticated policies available that cover such instances, the reality is that many local, smaller businesses do not have these risk management policies in place.

While businesses may be aware of the above physical risks associated with a power failure, they are often unaware of the various legal liability issues that also arise in the inevitable darkness. "While in the past, business owners may have been able to rely on the defence that power supplies are out of their control, it is now a known fact that our national electricity grid is unstable.

"Businesses have a duty of care owed to their customers to ensure that they have back-ups or safety measures in place and should ensure that they have adequate liability policies in place should these claims occur, as they will struggle to lay the blame on Eskom, should a lawsuit originate from a power failure.

"The power shortages can have a crippling effect on local businesses that aren't prepared and highlights the need for businesses across the country, and across sectors, to implement stringent risk management policies to not only avoid losses for their business, but also the South African economy as a whole," concludes Davis.