The Institute of Enterprise Risk Practitioners (IERP®) is the world’s first and leading certification institute for Enterprise Risk Management (ERM).

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IERP® International Institute of Enterprise Risk Practitioners

  /  Thought Leadership   /  Make The Pandemic Work For You!

Make The Pandemic Work For You!

We were in a period of global growth when the pandemic hit. Businesses are now either struggling to survive, trying to navigate with resilience or scrambling to respond to emerging threats and opportunities. Uncertainty creates opportunities. Businesses which have prepared themselves to cope with disruption will be able to take advantage of the opportunities that arise in times of crisis. However, many businesses are content with “status quo” but this will cause them to suffer in times of adversity. They need to understand and leverage on a Risk Smart Philosophy, said Rangam Bir, President & CEO of Gibraltar BSN Life.

Having experienced a multitude of black swan events including the Asian Financial Crisis, the Dotcom Shakeout, September 11th, the Global Financial Crisis, Brexit and trade wars, he said that business leaders need to be perennially prepared to grasp opportunities. Bir’s presentation was “Being Risk Smart to Capture Business Opportunities in a Crisis” delivered at the recent IERP International Conference. Businesses’ first instinct may be to hunker down in a crisis, but firms really need to step up their game and ensure their defence holds as they push forward.

“It is the risk professional’s role to ensure that the business remains viable during a crisis,” Bir stressed, remarking that risk is often viewed as an operational function, and risk managers are not proactively involved in strategy.

This can cause them to become disconnected from business processes. Additionally, they may become involved only late in the day, which could make them less effective than they would have otherwise been. They are more likely to be able to help shape business outcomes if they are involved from the beginning, Bir said, adding that such situations do not usually happen overnight. They usually happen over time. There was therefore a need to embed smart controls for frictionless experience. “They need to be proactive, integrated and robust,” he pointed out. “They need to be part of the landscape.” They also needed to shape business outcomes, serving the business with agility and achieving objectives.

And ideally, they should start early, and put systems and structures in place to deal with eventualities while there are no actual eventualities to deal with. Their measures should be stress-tested under business-as-usual (BAU) conditions to see if all components can respond with agility during a real incident. When a crisis does hit, the organisation will be in a position to address it proactively. But what should organisations be looking at, if they want to be in a position to take advantage of adverse conditions? They will need models and tools that will be able to deliver desired business outcomes. However, in their anxiety to get things right, companies may find themselves focusing too much on these, and not on the outcomes themselves.

“Companies should have a culture of analysis that provides intelligence which supports the business in a realistic, relevant way,” said Bir. “The root cause (of any incident/event) should be understood or the problem will be wrongly treated.” Businesses need to be risk-smart. Citing the global financial crisis of 2008 as an example, he said that the banks which took a hit had strong risk management even then, but they still failed. There were other weaknesses that went unnoticed, and these were what brought the business down. Being risk-smart means being proactive about building capabilities, and firms can do this only if they know what their weaknesses and vulnerabilities are.

Of course, the current situation, disrupted by the pandemic and exacerbating the uncertainty that already exists in the environment, is more complicated. It presents even more of a challenge to firms that may already be flailing in a world that is increasingly volatile, uncertain, complex and ambiguous. But businesses can still adopt risk-smart approaches to help themselves regain balance, bearing in mind that managing strategic risk now will have a long-term impact on their sustainability. With sustainability, the firm will be able to position itself to identify and leverage on new opportunities. Robust intelligence and data are critical to attaining this, hence the need for in-depth knowledge and understanding of the firm and its requirements.

Equally robust internal systems that enable quick analysis of the environment in which the business operates are must-haves. These should be supported by due diligence and data with integrity. Bir reiterated the necessity to understand the business of the organisation.

“You need to have balanced conversations about the risks confronting the business,” he said. “You have to understand the root causes or you cannot address the underlying ones. This may lead to poor execution or flawed solutions. A wrong diagnosis may have disastrous outcomes.”

He said ERM’s three “blind spots” were business strategy and models; people and capabilities; and long-term fundamental risks. Merely having a risk management structure also should not be equated with having risk management. There are several other factors that need to come together to make the structure work. “Analysis of future trends cannot be really determined by mathematical models, tools or systems,” he said. “You need to have robust systems internally to review the trends that the business is exposed to. You need to ask, is the business model current? Do we have the necessary capabilities? What disruptive trends will we face?”

As a final example of how important it is to understand the business you are in and the kind of threats which can confront you, he cited the case of Kodak and Fujifilm, both major players and market leaders in photographic film technology; both very successful and recognised globally. Then came digital photography, and their core businesses were suddenly under threat. Kodak actually invented digital photography but decided not to pursue that line of business. Fuji, on the other hand, re-looked at its business and found that its expertise was actually in processing chemicals. It applied this to other industries, and went on to bigger, better things. Kodak, on the other hand, went bankrupt.

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