A FRESH THINKING TOWARDS RISK MANAGEMENT; Unpacking the positive and negative aspect to risk
In this 1st article of the year 2021, I am geared up, more than ever, to continue creating awareness on risk management. This has led to the decision to rebrand the #Risk Awareness Series to now #Moriski by Nature, and I will be dropping many other exciting additions with time.
In this 1st article of the year 2021, I am geared up, more than ever, to continue creating awareness on risk management. This has led to the decision to rebrand the #Risk Awareness Series to now #MoriskibyNature, and I will be dropping many other exciting additions with time. Moriski is a slang Tswana name referring to a risk taker, and it is my way of bringing risk management much closer to the people and ensuring that the concept is effectively embedded across different levels. On the 2nd February 2021 I had the opportunity to be a panellist at the FNBB Budget Review Seminar, where I spoke to the risk management aspect of the topic “Quick wins to help your business now and beyond the pandemic.” This made me realize that there is more we need to do to spread awareness on risk management, particularly for smaller establishments. In this article I want to share some of the key highlights of what I believe constitutes as solutions, which if implemented, would make smaller businesses thrive in the current harsh economic climate. I will unpack two concepts; embedding risk management principles in SMMEs and harnessing the upside of risk.
There is no doubt that risk management is generally a new concept, and most SMMEs still regard it as a concept for large corporates. The Covid-19 pandemic is proving this otherwise, that in fact SMMEs equally need to embed robust risk management practices in order to thrive. The pandemic has caused a lot of disruption to modern day business, supply chains are being disrupted, cost of sales has drastically increased and timely delivery of supplies is no longer guaranteed. This is a clear indication that risk management strategies are urgently required especially by small establishments in order to ensure they continue operation in the foreseeable future. Through risk management practices, small business can establish Business Continuity Plans (BCPs) and devise strategies to enable them to continue working when hit by a disaster such as the current pandemic. The BCPs can have recovery measures like working from home enablement, provision of delivery services to deliver goods to clients and other strategies for specific risks unique to every business that can materialize and render the business operations to a halt. Through risk management, SMMEs can manage losses more effectively, remove wastage and address process breakdowns. It enables them to interrogate and identify revenue leakage streams and eliminate them. As the business costs are drastically increasing, entities can no longer afford to have operational losses due to people, inadequate processes and inadequate systems or infrastructure. Risk management practices can therefore play a significant role in limiting losses and promoting sustainable and controlled business growth. Recapping into the Botswana Budget Speech delivery, the Minister of Finance and Economic Development emphasized on elimination of perennial losses, which are the recurring losses and revenue leakages, as well as enhancing governance through ensuring mandatory audits as an example. This is a clear indication that even at a Government level, risk management remains a key consideration.
Seeing that the pandemic might be with us for a longer than expected time, tapping into the upside of risk, also known as opportunity risk, is an ideal solution that SMMEs can adopt. This is an infamous risk management concept that can be harnessed to make businesses survive. While risk is widely perceived from a negative side, there is also the positive side. It is important for SMMEs to not just focus on the catastrophic losses brought by Covid-19 pandemic, but also look closely at the opportunities that are now available as this risk has already materialized. There are opportunities to diversify businesses, opportunities for working from home and saving on rental and other operational expenses, creation of online stores and reducing office spaces and also opportunities to tap into new markets and also creation of new business ventures such as making masks, sanitizers and medical suppliers just to mention a few. When we harness the upside of risk, we afford our businesses to grow through challenges and make the obstacle the way, as opposed to giving in to defeat and shutting down. Since traditional risk management has been associated with loss events and commonly associated with negative consequences, the positive aspect of risk which is the opportunity risk or upside of risk has always been overshadowed. More often, we disregard the opportunities to create value by focusing more on what can go wrong. This is not to say we should not take calculated risks!
Risk management should therefore be embedded into the business strategy and not an afterthought or a tick box. Both the upside and downside of risk should be considered. In conclusion, I want to note that while the year has just begun, the risks are not going anywhere. The risk landscape continues to be unpredictable, and at this point we have learnt to expect the worst. It remains our responsibility to ensure the control environment remains robust and be on the lookout for emerging risks and possible opportunities that follow.