Three business risks from Israel’s current wave of violence

Three business risks from Israel’s current wave of violence

The wave of attacks that have been marring the security environment of Israel and the West Bank since early October have raised fears over the potential deterioration of the Israeli security environment.

Israeli-Arab citizens and Palestinian militants have been carrying out almost daily attacks in Israel and the West Bank. These assaults mainly involve the ramming of vehicles against crowds, stone-throwing and stabbings that target Jewish civilians and Israeli security forces personnel.

The wave of violence has so far left 10 Israeli and 52 Palestinians dead, leading to large-scale riots in the West Bank and increasing the risk of violence carried out by Israeli nationalists.

The augmentation of lone-wolf attacks creates a climate of instability within the country, generating three business risks.

  1. A decline in consumption

The period after the Jewish High Holidays generally represents a slight fall in household expenditures. This is factored in local business’ annual plans.

However, since early October, the Israeli retail sector has suffered a 40% decline in sales while restaurants are also experiencing a net drop in demand. The situation is nationwide but the most affected cities are Tel Aviv, Jerusalem, Ashdod and Beer Sheba. Sales at local malls have dropped between 20 and 40% and there is a net decrease in shoppers in commercial districts.

In addition, the tourism industry may suffer in the long-run from the protracted low-intensity violence in Jerusalem, as well as the tensions in the Tel Aviv area. As exemplified by the negative effects of the 2014 summer conflict between Israel and Hamas, negative tourism trends are difficult to reverse following a period of violence.

  1. Labour tensions

The current wave of violence generates a rift within the country’s society and increases the risk of labour tensions linked to socio-political rivalries.

Communal violence in Arab-majority districts in northern Israel has led to an increased risk of strikes organised by Arab labour unions and political parties.

Since early September, labour stoppages linked to the instability in Jerusalem have periodically hindered operations in northern Israel creating disruptions in the delivery of public services. At this juncture, labour tensions have not yet reverberated into a slow-down of the private sector’s activity.

Companies with a strong workforce of both Israeli Jewish and Arab citizens are trying to maintain a positive working environment to minimise the risk of being affected by the ongoing instability.

  1. Travel disruption and unrest

Israeli authorities have been enacting tight security measures in Jerusalem and throughout the country, trying to mitigate the threat posed by militant attacks and limit the risk of reprisal incidents.

While the long-term effects of these measures still need to be fully assessed, these security operations lead to an indirect business risk.

Tight controls and exclusion areas generate the risk of travel disruptions and related delays in the affected city. In addition, these means may be perceived as confrontational measures by certain segments of the local population leading to an enhanced risk of local unrest. Protests linked to the current surge of violence have the potential of leading to localised riots, especially in the northern parts of the country..

The ongoing instability also results in political tensions. Supporters of political parties opposing Prime Minister Netanyahu’s policies, both on the left and the right sections of the parliament, may increasingly organise protests in Tel Aviv and Jerusalem. This will likely lead to further indirect business risks linked to an overall partial deterioration of the local operating environment.

About Author

Riccardo Dugulin

Riccardo Dugulin is an analyst at Drum Cussac, a global business risk consultancy. He specializes in supporting international organizations and large corporations operating in emerging markets by providing them with critical risk management intelligence. His regions of expertise are the Near East, the Gulf, North Africa and Continental Europe. He previously worked as project manager for a French medical assistance company. He gained field experience in the Middle East having worked for leading think tanks in Dubai and Beirut. Riccardo holds a Master in International Affairs from the Sciences Po – Paris and a Bachelor in Middle Eastern Studies from the same university. Follow him on Twitter @RiccardoDugulin.