A business decision maker’s main objective is to satisfy clients’ needs and deliver on company promises. In order to do so effectively, a company needs to operate efficiently at all times. However, with companies increasingly facing a growing number of risks, both anticipated and uncontrollable, decision makers are taking strain and businesses are being adversely impacted.
The economic landscape is changing rapidly and as a result business owners are encountering new risks in their operating environment, which they are not adequately prepared for.
Executive boards are increasingly putting pressure on business decision makers, specifically Chief Financial Officers (CFOs), to ensure that various risk management, regulatory and compliance measures are in place and adhered to.
This pressure is only compounded as local companies seek growth opportunities elsewhere in the continent, as South Africa’s economic growth slows. The Deloitte 2015 CFO Survey revealed that 84% of Southern African companies cited growth as the top reason for investing in sub-Saharan Africa.
Over the past three years the need for reliable cover, by local-based companies, has grown across Africa and the globe. Throughout Africa, the risks vary greatly and without hands-on-the-ground expertise, the risks unique to a certain market can easily be miscalculated or misinterpreted, potentially causing a detrimental impact on the business.
The CFO Survey is an example of how risks are perceived differently, depending on region and point of reference. For South African CFOs investing in East Africa, the top five challenges identified include in-country political factors, a shortage of skills, regulation and infrastructure, currency volatility and logistics. CFOs operating in West Africa cite logistics, regulation, economic stability, in-country political factors and infrastructure as their most pressing challenges.
Meanwhile the 2016 Allianz Risk Barometer ranked macroeconomic developments (such as austerity programmes, commodity price increase, inflation/ deflation) in the top 10 list of global risks (placed 6th) for the first time, and as the top risk in the Africa and Middle East region.
With the most recent terrorist attack in Brussels, the risks associated with terrorism are also rapidly rising. Reports show that terrorism in Africa is steadily on the rise due to militant activity and can’t be ignored by businesses.
Faced with the statistics at hand, a focused and comprehensive enterprise risk management strategy is vital to a company’s survival and ability to grow.
This becomes a key tool in assisting a company in achieving its business objectives. An enterprise risk management strategy will not only limit a company’s risk exposure, but also assist in utilising the opportunities that may arise. In other words, by introducing innovative solutions, it enables senior executives to concentrate on growing the core business, instead of worrying about their cover and whether they are protected from risks.
When expanding outside of South Africa, it is crucial that businesses partner with an accredited and knowledgeable suppliers. If the incorrect supplier is hired, it can easily become another challenge they will have to navigate.
While there is no concrete plan to completely avoid risks, there are measures to minimise the impacts of these risks. Business insurance has evolved from processes and systems, into a new arena with different approaches and strategies. Decision makers should be using these strategies to ensure cost-effective solutions that are clear and easy to implement.