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Compliance, corruption, theft and fraud are top threats to global transport and logistics in 2024 says Allianz Risk Barometer

The top threats and risks facing the global transport and logistics sector in 2024, according to Allianz Commercial.
The top threats and risks facing the global transport and logistics sector in 2024, according to Allianz Commercial.

The global transport and logistics sector is facing widening risk exposure as supply chains become increasingly interconnected and subject to a host of negative impacts, from compliance challenges and corruption, to theft, fraud and climate change, reports the 2024 Allianz Risk Barometer. The report cites South Africa’s electricity crisis and infrastructure degradation as the leading threats to local transport and logistics. 

According to Alliance Commercial, The Allianz Risk Barometer incorporates the views of 3 069 risk management experts in 92 countries and territories including CEOs, risk managers, brokers and insurance experts across all leading business sectors, including transport and logistics.

The Allianz Risk Barometer 2024, from a global perspective, states: “The transport and logistics sector is facing significant challenges in 2024, with changes in legislation and regulation as well as theft, fraud and corruption, identified as the primary concerns.

“They are followed by business interruption (26%), cyber incidents (23%) and natural catastrophes (22%). The report emphasises the growing importance of addressing these risks to ensure business continuity and safeguard against potential disruptions.”

The report, which draws from late-2023 datasets, lists South Africa’s top transport and logistics risks being power disruptions and aging infrastructure (including rail networks, bridges and dams).  

While South Africa may be enjoying a respite from loadshedding and an uptick in container port turnaround times, the local transport and logistics sector is a vital link in the international supply chain infrastructure, and thus, directly affected by events impacting global logistics patterns.

New compliance risks

The report highlights several risk areas that transport and logistics businesses in South Africa should take note of. “The transport and logistics industry is particularly vulnerable to changes in legislation and regulation, which can lead to increased compliance costs, operational disruptions and competitive disadvantages. 

“Safety standards, emissions regulations, trade tariffs and customs procedures directly impact transportation providers’ operations, supply chain efficiency and profitability. Furthermore, shifts in government policies regarding infrastructure investment, taxation or labour regulations can affect transportation networks’ capacity, reliability and cost-effectiveness. 

“To navigate the evolving regulatory landscape and sustain business resilience, proactive regulatory compliance strategies, stakeholder engagement and advocacy efforts are crucial.”

Theft and corruption risks persist

The report lists theft, fraud and corruption as drivers of financial losses to the sector, as well as reputational damage, operational disruptions and regulatory non-compliance risks. 

“Cargo theft, fraudulent activities and corrupt practices can result in the loss or misappropriation of valuable assets, goods and sensitive information, impacting companies’ bottom line and undermining trust among stakeholders. These illicit activities can disrupt supply chain operations, delay shipments and compromise the safety and security of goods in transit. 

“Enhanced security measures, due diligence processes and collaboration among industry stakeholders are urgently needed to mitigate the impact of theft, fraud and corruption on supply chain integrity and resilience.”

Business continuity management is critical

Business interruption risks such as supply chain disruptions, natural disasters and regulatory changes also pose significant challenges for the transport and logistics industry, adds the report. 

“The top two causes of business interruption, following cyber incidents, are natural catastrophes and fire, with machinery/equipment breakdown or failure following closely behind. 

“These findings highlight the interconnectedness and volatility of the global business environment, as well as the industry’s reliance on supply chains for critical products or services. Consequently, improving business continuity management, identifying supply chain bottlenecks and developing alternative suppliers remain key risk management priorities for companies in 2024. 

“Additionally, maintaining strong relationships with suppliers, carriers, and partners, and conducting regular risk assessments to identify potential vulnerabilities, can help minimise the impact of interruptions.”

Interestingly, 23% of the report’s international respondents expressed concern over cyber attacks, which have taken the lead as the most significant new risk in the sector. 

“The recent surge in ransomware attacks has resulted in a staggering 50% increase in insurance claims activity compared to 2022. Hackers are now targeting both IT and physical supply chains, launching mass cyber-attacks and devising new methods to extort money from businesses,” the report states.

An Allianz snapshot - South Africa’s transport and logistics risk profile as of October-November 2023
An Allianz snapshot – South Africa’s transport and logistics risk profile as of October-November 2023

“Consequently, early detection and response capabilities and tools have become increasingly crucial. Investment in detection, supported by artificial intelligence, is expected to enhance incident identification. Without effective early detection tools, companies may face prolonged unplanned downtime, increased costs and a greater impact on customers, revenue and reputation.”

The rise in disastrous environmental events is also in the sector’s risk profile, the report says: “Natural catastrophes present additional risks to the transport and logistics industry, including damage to infrastructure, disruption of operations and delays in supply chain networks. 

“Climate change is expected to increase the frequency and severity of natural disasters, posing growing challenges for risk management, resilience planning and adaptation strategies. To ensure the continuity of essential services, the industry must prioritise risk mitigation and implement robust strategies to minimise the impact of natural catastrophes on supply chain operations.”

The report stresses that there exists an urgent need for the transport and logistics sector to address these key risks and implement proactive risk management strategies. 

“By prioritising regulatory compliance, enhancing security measures, investing in early detection and response capabilities and adapting to the challenges posed by natural catastrophes, companies can safeguard their operations, protect their reputation and ensure business continuity in an increasingly complex and volatile environment,” the report concludes.

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