31 August 2020 – Being risk intelligent, not risk averse, has never been as important as now. A big appetite for risk normally results in great rewards. However, it does not mean a company can enter any country or market without weighing up all the geopolitical risk factors and considering all the mitigation measures.
It is also important to remember when operating in Africa, that there are 54 different countries, and they all have their own risk profile. More importantly though, is to keep in mind that each province or region within each country, in turn, also has its own unique risks and challenges, which is not necessarily the same issues the country grapples with. Doing exploration work in the north eastern parts of Nigeria without security measures in place, for example, would not be a good idea. However, it does not mean abandoning the idea of working in Nigeria. There are many regions in Nigeria that is perfectly safe to operate in, if you are being risk intelligent. To be risk intelligent means being aware of the dangers, and staying informed about all developments in Africa, whether they be political, economic, or financial. It also means looking at different case studies and identifying the reasons why other companies have been successful in a specific jurisdiction. The risk profile and risk factors of regions and countries change continuously, and one needs to stay on top of these trends to prevent making the wrong decisions.
According to Christopher Palm, chief risk advisor at the Institute of Risk Management South Africa (IRMSA) leaders at the highest levels of the private and public sectors must embrace an enterprise-wide culture of integrated risk management to secure their future.
This means that private and public sector leadership must start thinking about the future together, using hindsight and insight to create foresight. “That is not enough though, thinking and designing alternative futures or responses to potential risks and opportunities, in advance and based on futures thinking and scenario planning, will, in essence, give your organisation the basis of fast and reliable decision-making in concert with a flexible and agile business model,” says Palm.
Organisations who do this successfully typically integrate their strategy, risk management and resilience playbooks to optimise decision-making. They also acknowledge that delegating ownership and accountability throughout the organisation is critical. To bring agility to their business model, they discard tall management hierarchies in favour of empowering people with the right skills to make business-critical decisions at point-of-contact resulting in a risk intelligent and resilient organisation.
Most of all, they break down silo mentality, that is, where information-sharing, decision-making and action are confined to a specific department or area of responsibility. “Risk management is collaborative by nature and that’s why we believe it plays a strong role in the risk intelligent future,” says Palm. Resilient organisations strive to become data-centric and technology-savvy to achieve their ends. “Risk management is not just about avoiding danger but about leveraging opportunities and it helps organisations map a sustainable growth path forward,” says Palm.
The IRMSA has identified six major threats that could affect an organisation:
- Exponential growth of information. Organisations who fail to build a competitive advantage around harnessing their data will be left behind.
- New technologies. Failure to effectively implement digital transformation and 4IR technologies will leave organisations vulnerable to those who do.
- The ability to develop innovative business models. If leaders cannot create new, agile and flexible business models delivering faster, excellent decision-making they will lose ground to rivals.
- Disruptive competition. Young upstart enterprises are shattering traditional business practices with completely different approaches to delivering value.
- The next generation market that not only expects data- and technology-driven experiences but supports agile disruptors over rigid incumbents. In other words, one has to be the best in breaking down barriers to entry or access to one’s products and services.
- A geopolitical landscape marked by COVID-19, climate change, trade wars, and other socio-economic upheavals.