• Myra Knoesen - FAnews Journalist

Strategy, risk and resilience

Looking back over the past five editions of the Institute of Risk Management South Africa (IRMSA) Risk Report, Chief Risk Adviser at the IRMSA, Christopher Palm, says it is disappointing to see that so many risks have materialised.

“Disappointing because first, the South African and industry risk profiles have remained largely the same and most of them have materialised over this period – so the risks were well known and yet the risk responses were overall ineffective,” said Palm.

Top risks SA will face in 2020

The IRMSA South Africa 2020 Risk Report includes a robust look-back analysis of the risks included in previous editions (2015 to 2019). Here are the top 12 risks South Africa will face in 2020:

  1. Sparseness of unified ethical and visionary leadership - Due to disparate values, a sparseness of unified ethical and visionary leadership may continue to impact negatively on South Africa’s brand, reputation, economic growth, and ability to build resilience.

  2. Continuing private and public governance - Due to lack of a common purpose and consequence management, continuing private and public governance failures may result in reduced credibility of public, private, labour and civil organisations; capital flight; and further economic pressure.

  3. Failure to root out deeply entrenched corruption - Factions in the ruling party, inadequately resourced chapter nine institutions and slow reaction to findings from state commissions (state capture etc.) may result in South Africa not being able to bring fraud and corruption under control, which may lead to unsustainable balance of payments, national bankruptcy and eventually a failed state.

  4. Changes in legislation and regulations - Due to imbalances of the past, lack of skills and/or lack of consultation (negatively impacted by competing objectives of private vs public or labour) there may be unmanageable proliferation of legislation and regulations, albeit well intended, that typically have unintended consequences that inadvertently impact economic growth.

  5. Ill-conceived NHI policy and/or sub-optimal implementation - Due to past inequalities, poor public health care services and limited access to private health care, an ill-conceived and/or sub-optimal implementation of a national health care solution may negatively impact health care and the economy.

  6. Ill-conceived land reform policy and/or sub-optimal implementation - Due to slow progress and politicisation of the land issue, land reform may not be successfully achieved which could have unintended consequences such as erosion of the country’s ability to maintain a sound economic system.

  7. Failure to develop, attract and/or retain talent - Due to an ineffective national education system (poor school infrastructure, poor teaching skills, inequality, lack of transformation) access to skills may further decline, negatively impacting investment, growth, employment and crime.

  8. Extreme weather events, natural disasters and climate change - Due to an uncoordinated response to climate change, extreme weather events and natural disasters may continuously increase, leading to increased cost of response and a deterioration of liveable space in which communities can prosper.

  9. Insufficient electricity and/or energy - Due to ineffective leadership, corruption, historical maintenance/refurbishment backlogs a constrained system, delays in key policy decisions and an enormous debt burden, Eskom’s ability to provide sufficient electricity may deteriorate further with negative impacts on economic growth and investor confidence.

  10. Disruptive technologies - Due to a lack of appreciation of the organic invasive nature and scope of disruptive technologies, organisations may not realise the impact of this risk until it is too late to recover from the negative competitive consequences thereof.

  11. Cyber attacks, data fraud and data theft - Due to increasing technology advances and complexities, cybercrime may escalate beyond organisations’ capability to manage, impacting on individual organisation’s ability to operate, and overall economic growth and business confidence.

  12. Failure, delay, and/or sub-optimal implementation of economic reform initiatives - Due to increasing technology advances and complexities, cybercrime may escalate beyond organisations’ capability to manage, impacting on individual organisation’s ability to operate, and overall economic growth and business confidence.

Risks have materialised

“The risks, which include unemployment, fraud and corruption, income disparity and failure of governance, have not just already materialised, but have actually deteriorated, for example, unemployment. Looking ahead, risks that are making their way onto the South African and industry risk radar are climate change, which has sporadically been included on South Africa’s risk profile, social disobedience, and pressure on South Africans’ Chapter nine institutions, which include the Public Protector and the South Africa Human Rights Commission,” continued Palm.

“South Africa needs effective Chapter nine institutions who uphold and enhance democracy on our behalf. A strong, ethical and independent leadership that visibly holds key role players accountable within the roles they have been voted into, is needed,” added Palm.

The risk profession

While the risk profession in South Africa is not lagging behind its international peers, board members, executive committees and CEOs of South African organisations should expect more from their risk managers. Businesses must actively involve their risk managers, and to actively be exposed to the business-critical information so that they can bring value to decisions. “Local companies should demand more from risk managers, and we should deliver. If businesses know what their options are and these options have been quantified, it gets easier to make the right decisions,” added Palm.

Palm said the risk manager who adds the most value to an organisation’s performance is the one who has accepted the notion that risk is about the future and that uncertainty is not confined to a risk register but that the integration of strategy, risk and resilience is a critical next step, if not already adopted. “Reflecting on the risks that have materialised over the past five years, many things have to be done differently. The first is ethical leadership, accompanied by pervasive and persistent accountability and consequence management. A very critical paradigm shift required by leadership is that risk responses that were effective in the past are not guaranteed to address the risks and opportunities of the future.”

There are three key requirements for companies to do more of the good, less of the bad and grow resilience to thrive in an ever-changing landscape. “Firstly, everyone needs to start talking about strategy, risk and resilience. Secondly, we need to clearly understand who our stakeholders are, the rules they play by, and the context in which this will happen. Lastly, organisations will need more agility and robustness in their governance processes.”

Writer’s Thoughts: Risk responses that were effective in the past are not guaranteed to address the risks and opportunities of the future. Should local companies demand more from risk managers? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za


Article published courtesy of FANews


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