Being prepared has never been more important for organisations
Government’s new planning commission shows good foresight
Private and public sector organizations, of varying sizes and across all spheres of activity, need to be effectively prepared for a wide range of possible eventualities rather than trying to predict particular outcomes.
This is the view of Mark Tippins, principle consultant at Johannesburg-based business transformation consultancy, Ovations.
“It is heartening to note, therefore, that the South African government has introduced a new portfolio that falls under former Finance Minister Trevor Manuel in the Presidency, namely the National Planning Commission.”
“Essentially, the government appears to be implementing a structure that could lend itself to implementing Enterprise Risk Management. The holistic view across its myriad ministries, departments and agencies will enable more proactive integrated risk management into the future.”
A vital principle of effective risk management, says Tippins, is being able to have a view across an entire enterprise, whether its prime function is to deliver government services to citizens and taxpayers, or private sector goods and services to consumers.
“Unfortunately, in South Africa and around the world, not enough attention has been paid to scenario planning and enterprise risk management and the consequences of this negligence and lack of foresight are currently being worked through the system.
The big questions are how long this process will take, and what is the full extent of the casualty list that continues to grow on a daily basis,” he says.
Prepare for best and worst case scenarios
Tippins believes it is hugely important for organisations to identify their strategic dependency on factors that are external to their own operations – such as the supply of electricity – and then to work out how critical these factors are and what can be done to limit the fallout that may occur at some time in the future. It is also critical for organisations to prepare for best and worst case scenarios so that they are not merely in reactive mode when eventualities take place.
“Right now it would be valuable for strategies to be developed for two particular possibilities: the first one is the possibility that the global economic downturn brought about by the credit crunch will continue for several years; the second one is the possibility that an economic turnaround is around the corner,” he adds.
“Organisations that are best prepared for both potential scenarios are far more likely to survive and even thrive than those that simply react to changing realities.”
Tippins says it is also vital that preparations and strategies for future eventualities are not one-way bets on absolute outcomes as this is contrary to what risk management is inherently about in a world where volatility and uncertainty have become the norm.
“True risk management means having a transparent and clear view across an enterprise without holes and gaps or areas of fuzzy visibility which can lead to problems down the road; there has to be an effective organisational focus. The increasing accountability of senior management to manage organisational risk requires a holistic organisational insight into risks,” he adds.
Understanding risk can bring competitive advantage
Significantly, Tippins says organisations that fully understand their risk factors are more likely to benefit from future opportunities than peers and competitors that don’t.
“This can be used as a form of competitive advantage by organisations that take the time and effort to research and understand their risk factors, their business drivers, their markets, their environment and their competitors. There is no crystal ball-gazing involved, merely a carefully orchestrated case of being prepared for the future and what it may bring,” he says.
Another extremely important consideration in modern-day risk management, stresses Tippins, is the fact that it requires intellectual capital for optimal results– it cannot simply be left to a software programme to run and manage. Appropriate management skills are needed to understand all the influencing factors and to make the necessary strategic decisions.
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