CIVIL UNREST: Peak problems

One of the world’s most significant commercial hubs has recently found itself at the centre of uncharacteristic unrest. Hong Kong’s future is hard to predict, but the business impact could have global implications. Martin Allen Smith reports

Known for many years as the Pearl of the Orient, Hong Kong is also Asia’s self-proclaimed ‘world city’. It has enjoyed star billing within the region as a top attraction both as a place for organisations to do business, and as a destination for tourists to go shopping. The former British colony has continued to thrive since transferring to Chinese rule in 1997, but this year has seen things take a volatile turn as an initially peaceful series of pro-democracy protests have developed into a wide range of civil unrest incidents, ranging from vandalism and strike action to street clashes with police and arrests.

The impact could be far-reaching; for Hong Kong itself, for China, and for the many multinational organisations that have significant operations there. The semi-autonomous Chinese city is facing up to the prospect of its first recession in a decade, with all of its usual growth sectors under huge stress. Banks are issuing profit warnings, while hotels, restaurants, and other retail businesses in areas affected by the protests have suffered a major reduction in business. Economists estimate that retail sales could fall by anything from 20 to 30 per cent this year. Figures from The Hong Kong Retail Management Association suggest that some of its members located in tourist areas have reported a fall in retail sales value of at least 50 per cent during August 2019.

The nature and duration of the protests have sent ripples across a diverse range of sectors, with aviation, transportation and healthcare all revising their expectations for the coming months’ trading. Disruption to operations at Hong Kong’s airport has been particularly impactful. More than 74 million passengers used the airport last year, and it handles 1,100 passenger and cargo flights each day, contributing an estimated five per cent to Hong Kong’s GDP directly and indirectly. With protesters targeting the site on numerous occasions since the protests started, this has the potential for far-reaching consequences both for businesses and individuals.

There is of course a wider backdrop for China in all this, embroiled as it is in something of a war of words – and tariffs – with US president Donald Trump. Businesses operating in the region have found themselves having to carefully manage their political positions too. Airline Cathay Pacific had gone on record saying that it “wouldn’t dream” of muzzling the views of its 27,000 Hong Kong staff, but following the dismissal of several pro-democracy supporters among its workforce under apparent Chinese pressure, some employees suggest that this is exactly what has happened. The issue has put the airline in a turbulent position over whether to block its staff from taking part in or voice support for the demonstrations, or potentially risk losing its China-facing business. In mid-August, the carrier’s chairman John Slosar underlined its support for free speech, saying: “We employ 27,000 different staff in Hong Kong. We have virtually every opinion on every issue amongst our staff and we certainly wouldn’t dream of telling them what they have to think about something.” However, a move by China’s aviation regulator to bar staff supporting protests from working on flights to the mainland or through Chinese airspace came around the same time as four Cathay staff were dismissed, including two pilots, leading some to suggest the two were linked.

The Big Four accounting firms have also moved to distance themselves from alignment with protesters, issuing statements following the publication of advertisements by a group of unnamed individuals claiming to be employees. PwC responded: “The advertisement does not represent the firm’s position. We firmly oppose any action and statements that challenge national sovereignty. The rule of law and the ‘One Country, Two Systems’ principle are the foundations to maintaining stability and harmony in Hong Kong. We condemn all violent and illegal activities, and misleading statements and we urge the society of Hong Kong to work together to address the challenges ahead, and safeguard the stability and prosperity of Hong Kong.”

Problem areas

For organisations that find themselves in one of the pockets of disruption, the importance of proper preparation will be brought into sharper focus. Marsh has advised clients that, regardless of the heightened risk threat level, all Hong Kong-located clients should immediately review and update their business contingency plans and crisis response protocols for specific elements that relate to any protest, demonstration or other disturbance. Specifically, it warns that plans should include security measures to protect staff or customers from harm or injury. It also recommends that there should be established protocols for engaging with and assisting first responders including the police, fire emergency and medical services.

The firm says a working emergency communications system is also essential, ensuring employees can communicate quickly during dangerous situations, and also suggests that risk managers review their insurance coverage in light of the potential threat of further unrest.
Limiting exposure to disruption has also been top of the agenda for many large organisations. Insurer AXA has around 2,000 employees in Hong Kong and has told managers to allow flexible working conditions for employees, including working from home where practical.

Meanwhile, some of Hong Kong’s largest banks – including Citigroup – have closed certain branches during the protests as a precaution. Investment firm BlackRock postponed a two-day conference due to take place in Hong Kong in September, electing to defer the event until February as a precaution in light of the potential for disruption to travel and other plans for attendees. Large exhibitions across a range of other industries are also under threat, with Seafood Expo Asia (originally scheduled to take place in September) cancelled due to the potential travel disruption, and organisers of a number of other large exhibitions also reported to be considering cancellation or postponement. The knock-on effect has been felt sharply by the hotel sector, with many – including some of the city’s top hotels such as the Mira Hong Kong and the InterContinental Hong Kong – placing some staff on involuntary leave in response to lower-than average occupancy rates. The government’s own figures suggest visitor numbers were down by half during the period 15th-20th August compared with the previous year.

Stuart Bailey, chairman of the Hong Kong Exhibition and Convention Industry Association, believes it is “business is as usual” for those attending trade exhibitions and conferences in Hong Kong however. He said: “At this time we are seeing that major exhibition and conferences in Hong Kong are running without incident or interruption. Exhibition and conference events were not targeted for disruption. Hong Kong is definitely still open for business and safe to [visit].”

What makes developments in Hong Kong so important on the global stage is that this is about far more than ‘a little local difficulty’ that will soon pass. There are very real concerns that the events of recent months will irrevocably damage the island’s reputation as a stable place to do business, with the risk that it could lose out in a big way to other financial hubs such as Singapore, when large organisations are making key investment decisions over the coming years. It has already seen its position on the Safe Cities Index – a biennial ranking compiled by the Economist Intelligence Unit based on factors such as health care, dedicated cyber security teams, disaster continuity planning and community-based police patrolling – fall to 20th from 9th two years ago.

The sporadic clashes on the streets of Hong Kong – which in any case are generally limited to small areas of the city – may well cease in the weeks or months to come, but for the long-term, political commentators wonder if China’s light-touch to the territory might also have been shifted by events, changing life in the city both for individual residents and for the businesses that ply their trade there.

EXPERT VIEW: Is Hong Kong safe to visit as protests escalate?

As protests enter their fifteenth week in Hong Kong, following what has been the most violent and chaotic weekend yet, Traveller Assist Group’s Craig Wright, says the city is safe for travellers – as long as they avoid the protests, remain vigilant and follow local news and incident alerts.

Protesters are increasingly targeting the disruption of public transport, including the Mass Transit Rapid (MTR) network and Hong Kong International Airport (HKG). On August 12th and 13th, hundreds of departing flights were cancelled and arriving flights diverted due to HKG halting all operations for safety reasons.

On 15th August, Traveller Assist, at the request of an insurance underwriter, successfully evacuated 159 foreign students and expats from Hong Kong via a chartered flight, followed by assisting a further 23 people to leave the country via commercial flights over the following days. Two weeks later, protesters succeeded in shutting down transport links to and from the city’s international airport, which has already caused scores of passengers to miss flights, and some airlines to delay flights. This is extremely disruptive for business and pleasure travellers.

Due to unpredictable routes that protesters are taking, caused in part by government roadblocks and protesters wanting to avoid prolonged confrontation with police and counter-protesters, it is difficult to predict the next protest location and because of this, it is increasingly likely that foreign nationals could be caught up in protests and surrounded by crowds.

Travellers to Hong Kong should remain flexible and be prepared for delays, and avoid wearing black t-shirts, which have been worn by the protesters and white t-shirts, which have been worn by the counter-protesters.

One of the biggest risks is inhaling tear-gas if you happen to be nearby or down-wind of a violent protest, and there is also an increased risk of damage to eyes from lasers which are being directed at surveillance cameras to hide the faces of protesters.

Travellers should also avoid taking photos or filming the protests as journalists and innocent bystanders have also been targeted. In addition, due to strict social media laws in Hong Kong, travellers should avoid posting any images or comments about the protests, or any political issues.

Craig Wright is director of special risks at Traveller Assist. He has held several roles including special risks underwriter where he was responsible for K&R, extortion, hijacking and piracy. He has also operated on high risk security teams with the BBC and CNN in the Middle East and Africa, and worked for the United Nations at the International Court of Justice in The Hague. Wright started his career as an officer in the British Army where he served on global counter-terrorism and counter-narcotics operations.

This article was published in the September-October 2019 issue of CIR Magazine.

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