Ahead of the imminent elections in the country in 2019, some organisations are beginning to experience uncertainty in their business processes due to the looming political and socio-economic volatility that elections in Nigeria have been known to herald. Amid falling oil prices, heightened insurgency incidents and mistrust between the north and south, the last general elections which held in 2014 left a lot of businesses unable to cope especially after the recession hit the country in the months that followed. The current political climate has seen the rise of economic and business analysts trying to predict the outcomes for businesses and the nation at large.
In order to survive, businesses must be able to envisage the ripple effects of certain external factors and take the necessary steps to mitigate damaging impacts on their processes or overall business outcomes. In addition to the associated risks induced by political incidents like elections, organisations also need to consider more ways to proactively predict and mange business risks as they occur. This is one of the hallmarks of sustainable business practices.
Assessing Business Risks
Business risks as they affect the operations and processes of an organisation can either arise from internal or external factors. According to the Australian Standard, risk is defined as “the chance of something happening that will have an impact on objectives.” They affect a business’s ability to operate either directly or indirectly.
Keeping in mind that some of these risks can come up at any given time, forward thinking businesses should be aware of some of the common risks that directly affect them and make efforts to curb their effects. Some of them include;
Climate Risks & Natural disasters: The impact of damages to businesses caused by natural disasters and climate risks due to extreme weather has grown in recent times. The UK Climate Change Risk Assessment 2017: Evidence Report clearly illustrates a plan that businesses, industries and even the government in the UK can adopt to reduce the effect of climate risks on their operations and processes. According to the report, when organisations seek to address the impact of climate risks, they are able to anticipate future changes that can herald the possibilities of new opportunities for different sectors. The private sector, it is believed, is expected to deliver the most adaptation action in these instances like building capacity both at the regional and national level. The government on its own part should provide enablement and facilitate support to encourage the private sector adaptation initiatives through policies, regulations and other supportive measures. Some of which include; adequate information sharing, public sensitization and awareness, providing resilient infrastructure like ICT, power, fuel supply, transportation and water.
Pandemic risks: In the wake of fresh cases of the Ebola outbreak in the Democratic republic of Congo, governments and international organisations have heightened their defence systems to forestall damaging effects the spread of the epidemic can have on them. According to a Forbes report, it is acclaimed that the likelihood of the Ebola outbreak hampering major business operations especially for global organisations is minimal. But this risk should serve as an opportunity for businesses to review some of their plans especially continuity plans in the event of being exposed to not just the current Ebola threat, but any area that poses a pandemic risk. Businesses that want to mitigate against the harsh effects of being exposed to pandemic risks must also consider reviewing their travel security protocols and the strength of their knowledge transfer systems. All of these may go a long way in helping organisations function seamlessly in the face of pandemic risks.
Legal risks: Organisations are exposed to legal risks when they are faced with insurance issues, dispute or conflict resolutions, contractual breaches, non-compliance with regulations and other business liabilities. These are sometimes the most difficult risks that organisations have to deal with and manage in the course of their operations. Traditional approaches to risk usually focus majorly on losses and credit risk, but in 2009, the International Standards Organisation (ISO) published a new approach to managing risks that fall under this category. The ISO: 31000 Risk Management – Principles and Guidelines broadly provides four categories of legal risks that will help organisations better measure and manage legal risks. They are;
- Litigation risks: litigations are usually the most discussed legal risks organisations face and they may occur as a result of an endless list of issues like; employee misconduct, accidents, product liability, etc.
- Contract risks: contract risks deal with breach of contracts of other contractual liabilities that may come up between businesses and their vendors or associates.
- Regulatory risks: these risks occur in the face of uncertainty that arise from an agency or regulatory body’s actions or decisions as they affect industries.
- Structural risks: these types of risks usually affect particular industries, technologies or business methods. The scope of structural legal risks are quite broad and they mostly affect an organisation’s competitive landscape.
Technological risks: These risks occur as a result of failures in computer network failures and associated problems that arise as a result of the use of outdated or mismanaged equipment. Cyber incidents and cybercrime have become a major concern for many global organisations that constantly fight to ward off hacking attempts and data breaches in this present era of digitalisation. For businesses these attacks pose a threat to the security of their customer records and personal information, employees, financial records, business ideas, marketing plans, intellectual property, product design, patent applications and so on. Most organisations have come to realise that investments that mitigate technological risks are worth more than the consequences of having to deal with the issues that arise from technological risks. However, a few simple tips will also go a long way in managing or avoiding technological risks.
- Developing and adopting policies and procedures that outline security measures for protecting the business against these risks.
- Producing an incident response management plan. This plan is usually put in place to give support to the policies and procedures that have been put in place.
- Training and sensitisation of both new and existing staff is a critical measure in ensuring that the plans and policies which have been put in place are followed to the latter.
- Ensure updated software and proper back up mechanisms are put in place for all computer and network systems.
Economic and Financial risks: this is arguably one of the major risks businesses worry about most of the time. They occur as a result of global financial events, increase in interest rates, shortages in cash flow, high costs of good, unfulfilled customers’ payment and so many more. In the face of economic or financial risks, businesses that would stay afloat are those that consider and imbibe some or all of the following approaches;
- Diversification: this solution encourages both organisations and individuals to invest in a wide range of safe ventures.
- Invest in the proper insurance: insurance is a principle safeguard against business risks. These investments should be put in place to mitigate or protect businesses against costs they can’t easily afford.
- Reduce debt to the barest minimum: businesses should make concerted efforts to reduce debt liabilities or altogether eliminate them to be able to maintain the financial liberty to operate optimally.
As a rule of thumb organisations that wish to remain sustainable and continue to experience business growth, should make managing risks and integral part of their processes and operations.