Special Feature (Part 1): Wrangling risk in Covid-19 and beyond
In order for businesses to survive the Covid-19 storm, companies have to be ‘risk intelligent’.
Risk management in the modern-day business landscape is becoming increasingly crucial as we navigate through uncertain times. In order for businesses to survive the storms, companies have to be ‘risk intelligent’.’ Chief risk officers are now charged with ensuring the organisation's financial stability and overall good company health, especially during stormy seasons like Covid-19.
by Narissa Subramoney.
The Covid-19 pandemic presented businesses, individuals and the global economy with an unprecedented challenge. Never before in human history have we shut down the global economy due to a pandemic, and neither have we attempted to reopen said economy while dealing with the consequences of a highly contagious disease.
Business leaders in the public and private sectors have had to dig deep and find alternative solutions to survive the shut-down or allow operations continue under strict social distancing protocols. This has included allowing employees to work from home or changing working conditions that allow operating with skeletal staff and rotating teams, while providing additional non-pharmaceutical support including masks and sanitisers for employees. Companies are also having to come up with strategies and protocol on how to respond if a staff member has been exposed to the virus.
The pandemic is the ultimate test for corporate leadership, and their resilience in these times will depend on their ability to learn and adapt as new information presents itself. Leaders must be prepared to incorporate different approaches, be this in stages or radically, depending on the business needs.
Risk officers (ROs) have a unique set of skills that allows them to foresee potential problems and envision risks that others can miss. Equally important is how these risks and strategies are presented. The board and its executive committees must be confident that the RO or risk team can identify most threats ahead of time and that the recommendations presented can be applied.
The black elephant
So, did CROs see Covid-19 coming? Christopher Palm, chief risk officer at the Institute of Risk Management South Africa says 50 percent of ROs refer to Covid-19 as a “black swan”, which is defined as an unpredictable or unforeseen event, typically one with extreme consequences. Christopher refers to the 2011 American thriller, Contagion: “If you’ve watched it, you sit back and think, ‘Well, they’ve shown us movies about this kind of virus, so it’s not inconceivable.’”
But he admits that preparing for this kind of scenario hinges on how this information is communicated to leadership. “We certainly won’t have a problem convincing them now,” says Palm. “I call Covid-19 the black elephant, not the black swan. [A pandemic] has always been the elephant in the room, and so has climate change, so this is not new to us. We just chose not to speak about it, because it formed part of our biases.”
Christopher says it’s time now for companies to support these emerging risks much better than they have in the past. “It’s not just about waiting for the board and executives, it’s about doing more, and using the tools technology is providing like big data sets, tracking data, tracking performance, tracking the external environment, key risk indicators and building scenarios.”