As South Africans prepare themselves for higher stages of load shedding in the coming colder months there remains a growing concern around the possibility of a total grid failure.

What is grid failure?

A grid failure is described as a total or partial interruption or suspension of electrical power supply from the national, regional, municipal or private grid supplier resulting in widespread power outages.

The risk of a total grid failure is seeming like more of a real possibility and can no longer be considered an unforeseen event, meaning it no longer falls within the definition of an insurance peril. This has necessitated insurers to subsequently exclude cover.

Although the South African Special Risk Insurance Association (Sasria) recently withdrew circulars announcing that it will no longer provide cover for damage to property caused during riots and protests in the event of an electricity grid collapse, there are other risks that need to be assessed.

Prepare and take proactive steps

The country has reached a stage where preparation for increased load shedding and a possible complete blackout needs to be factored into strategic planning. 

To manage the risks associated with any incident, including a potential grid collapse, individuals and businesses are urged to take proactive steps and have contingency plans in place to manage any possible disruptions.

Effective risk management involves identifying potential risks, assessing how likely they are to happen, what their impact may be, and how you can minimise or mitigate them. Once you have determined these elements it is essential to put the right measures in place and formulate a risk management plan. 

Five risk management strategies for individuals and businesses to consider:

  1. Risk assessment: identify all potential risks and consider the possible resultant damage. Also include a risk assessment related to your finances, investments and legal compliance.
  2. Risk control: some risks cannot proactively be prevented. Put systems in place to minimise the impact they may have.
  3. Risk financing: involves having a financial buffer in place for reparations or to cover potential losses for a short period of time.
  4. Risk governance: this risk management strategy involves formulating a risk management team who are responsible for overseeing all risk management measures and who are accountable for responding to risks as soon as they arise.
  5. Continuity planning: involves thinking ahead and creating a plan to quickly resume critical functions should an incident occur.

You may need to integrate a few of these strategies, depending on the nature of the risks you are planning for. Be realistic, learn how to prioritise and formulate an effective risk management strategy best suited to your specific needs.

Regularly review risks & controls

It is important to note that risk management is an ongoing process, so it is essential to regularly monitor and review your risks and controls. This can involve conducting regular audits, updating your risk management plan as needed, and monitoring industry trends to identify new possible risks.

By taking proactive steps to manage the risks associated with a potential grid collapse, individuals and businesses can help to ensure that they are prepared for any eventuality.