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Research and Briefings

Q3 2020 Taking Stock

Retailers, Restaurants Cannot Ignore Social Activism


While they continue to navigate the challenges of the ongoing COVID-19 pandemic, the retail and restaurant industry must now contend with yet another seismic shock: civil unrest and activism.

Following recent events — including the deaths of George Floyd in Minneapolis, Rayshard Brooks in Atlanta, and others around the country — momentum for the Black Lives Matter movement continues to build, with widespread protests occuring across the country and internationaly. While largely peaceful, demonstrations in cities and smaller communities have at times been accompanied by violence and property destruction.

Simultaneously, activists — with broad public support —are increasingly using the internet to demand that businesses show sensitivity to and take action on a range of social issues, including racial injustice and gender diversity.

While these movements are not new, they have intensified amid a pandemic that has left retail and restaurant businesses and employees especially vulnerable. Forrester forecasts that the global retail industry will lose $2.1 trillion in 2020 from COVID19, while the National Restaurant Association estimates that the US industry lost more than $185 billion in sales through August.

In addition to affecting their brand visibility and reputation, activism can present sizable risks for retail and restaurant companies due to their employees’ frequent in-person — and, increasingly, outdoor — interactions with the public during the pandemic. Even if not directly targeting specific retailers and restaurants, activism can impact and damage people, property, reputations, and bottom lines.

As retail and restaurant companies look to the future during a particularly challenging and politically charged time, it’s imperative that they think ahead about the various impacts of social activism and take steps to prevent, mitigate, and respond to them.

Protecting Reputations

The message for retail and restaurant companies is clear: In the view of many, inaction on social causes is no longer acceptable. And how organizations respond — or fail to respond — to internal and external pressures may be critical to their reputations and bottom lines.

Even if your organization has not yet been affected by ongoing social activism, it is important to have a plan. Consider creating a crisis management team or smaller targeted working group that includes representation from across the organization, including risk management, human resources, legal, and marketing and communications.

Such a group should:

  • Identify the potential impacts you could face. These could range from an isolated protest or looting incident involving a single physical location to a viral campaign with the potential to substantially damage your reputation and cripple you financially (think #boycottXYZInc).
  • Test how you would react to these specific scenarios and develop a process for gathering the right information to proactively address them or respond appropriately. Team members should also determine how to engage with traditional news media, with activists on or near your premises, and with consumers and others on social media.
  • Focus on communications, with an emphasis on striking the right tone. An inadequate or insensitive response to social pressures could make things far worse than they initially were. What’s more, a superficial or hasty response to what activists and others perceive as long-term, systemic problems couldbe considered disrespectful and draw even more unwanted attention to your organization.

Safeguarding People and Assets

Organizations should consider how to protect people and physical locations from targeted protests or indiscriminate rioting and looting. In June, for example, the flagship location of a leading retail chain was looted as violence erupted across New York. Later in June, an Atlanta location of a fast-food restaurant chain — the site of the Rayshard Brooks shooting — was set on fire by protesters. A number of stores along Chicago’s Magnificent Mile were also looted during a night of violence in mid-August.

Among other items, plans developed by emergency response and employee health and safety teams should consider:

  • Under what circumstances would specific locations close or change their hours of operation.
  • Which employees, leaders, and others to notify in the event a company location is involved in an incident that poses a risk to people or property.
  • When employees and customers at risk should shelter in place or evacuate.
  • How, if at all, operations have changed because of the COVID-19 pandemic — for example, increasing outdoor footprints, having employees deliver customer orders, or fewer employees overall — may affect security concerns.

In the event of unrest, it’s vital to monitor local law enforcement and local government authorities’ communications and ensure access to real-time information about which employees are working in specific locations. Before an incident, gather employee contact information — including personal email addresses and mobile numbers — so you can reach workers through multiple channels.

At the same time, it’s important for retailer and restaurant leadership and local managers to understand how they can protect employees, customers, and properties without being unnecessarily confrontational or causing additional brand damage. Manager and employee training should focus on communication and personal safety, including how to deescalate conflicts before they get out of hand. A renewed focus on training is especially important given likely recent staff changes, turnover, or prolonged absences as a result of COVID-19.

Insurance Considerations

Retail and restaurant risk professionals should review their insurance programs ahead of any potential unrest or targeting by activists. Several forms of coverage could potentially apply in the event of specific losses:

  • Workers’ compensation coverage will respond, in most cases, to employee injuries resulting from unrest and activism in the workplace.
  • General liability (GL) policies will generally respond if a customer or other third party is injured. In addition to the general coverage for bodily injury sustained by third parties, GL policies typically also provide limited coverage for the cost of providing emergency first aid to customers and other third parties injured on the insured premises. A GL policy will also cover the cost of damage to a third party’s property and may fund the defense of lawsuits alleging negligence. Depending on the size of a loss, umbrella and excess coverage might also respond.
  • Property insurance can respond to physical damage, such as broken windows and doors. Business interruption coverage may also apply if one or more insured location is forced to close following unrest.
  • Property terrorism insurance typically provides coverage for physical damage and business interruption resulting from acts that are motivated by politics, religion, or ideology. Political violence (PV) insurance, meanwhile, provides coverage related to war, civil war, rebellion, insurrection, coup d’état, and other civil disturbances. Coverage for strikes, riots, and civil commotion is typically included in PV policies and may be found within allrisk property policies; it can also be added to a terrorism policy through what is commonly called an SRCC extension.
  • Directors and officers liability (D&O) insurance may provide coverage for litigation or other activity arising out of shareholder activism, depending on policy wording. D&O coverage can also respond to shareholder suits alleging mismanagement by senior leaders, among others.

Some D&O and umbrella and excess policies contain crisis response endorsements, which can reimburse insureds for the cost of crisis management and public relations support; in rare cases, a GL policy may also include such an endorsement. Access to specialized crisis management, security, and investigations services may also be available in emerging security and integrity incident response policies, which can cover dozens of insurable events. Unlike traditional forms of insurance, coverage under these policies can be accessed not only following an insured loss but also upon suspicion, allegation, or threat of such a loss.

No organization — including retail and restaurant companies —is immune to the pressures of activism and unrest. While these events can cause a variety of potential losses, they can also present opportunities for those that respond effectively. Those that take steps to prepare for and protect against their effects can demonstrate not only resilience but social and community responsibility.