Changing face of risk profiles in  businesses 

A man washes his hands before entering dfcu bank along Kampala Road. PHOTO/KELVIN ATUHAIRE

The Covid-19 pandemic is redefining companies’ risk profiles. Risk experts will, therefore, have to redefine some rules to enable businesses sail through these uncertain risks for them to deliver on their targets. Companies will have to re-strategise the way they achieve their targets or alter them completely,  Justus Lyatuu writes. 

With businesses slowly getting back to  normal, organisations should also be thinking about safeguarding against potential threats that could render their investments helpless in the face of uncertainty such as the current disruption occasioned by the Coronavirus disease (Covid-19).  
The unimaginable toll that Covid-19 pandemic has suddenly inflicted on livelihoods, businesses and the economy is a wake up call for businesses and organisations to change their mode of operations. 

This is because for far too long, al most organisation cared about are the traditionally known threats. Although Covid-19 could become another business risk in the books, it serves as a prime example of what could happen without due notice. 

Business experts say since time immemorial, every business faces risks that could present threats to its success. Businesses face risks around strategy, profits, compliance, environment, health and safety and so on.

Other risks according to experts include strategic risks, credit risk, reputational risk and operational risk.

Mr Charles Ocici, a business coach, believes that traditional risks are those that are properly insurable and not at global nature.

He explains that for instance, an aircraft that collapsed, got burnt down, a worker who got in an accident at work all get insured but when you get all aircrafts on the globe burnt, the insurance companies insuring such companies will collapse.

“Even with Covid-19, health insurance companies claim they can cover. That could be possible because the death rates are below 2 per cent of the world’s population. But if it is a situation like that of the Spanish flu, insurance companies would collapse,” he says.

Mr Ocici also believes even after Covid-19, no insurance company will ably rescue the business losses of the airlines industry. The proprietors will have to live with their losses.

 “You can say the aviation sector is going to make losses for 12 months but currently, we are not sure; for instance, if the airports are closed, the ticketing offices and hotels will automatically close,”  he says.
Another instance Mr Ocici says is where schools are closed and many resorted to the Internet which was something good. But how sustainable is that? 

Ms Cynthia Margaret Nakowa, the secretary of the Institute of Risk Management-Uganda Chapter, says due to the changes in the country, companies are going to have to restrategise methods used to achieve their targets, or change their targets.

“As for credit risk and due to changes in inflows and outflows of cash, companies are exposed to failure to meet their credit obligations, or failure of their creditors meeting their obligations,” she said.

She also observes that there will be reputational risk, the way companies have managed the pandemic will either make or break the perception that the public has about them.

“As for the operational risk, there are going to be more fraud attempts in companies, controls should be amended to make sure loopholes are catered for,” she says.

Going forward
Mr Edirisa Sembatya, a business trainer and managing director at Finding XY, says Covid-19 is going to stay longer and that will affect organisations’ staff, operations that is something that is going to be a ‘new normal’ that means that businesses should accept the costs of managing it.

“It is a potential risk that Covid-19 is in the public can’t be controlled anymore. So as a business, you must ensure that there are necessary measures that your employees are protected,” he notes.

He adds; “That’s a cost and if anyone one falls sick, as a business you have to close down for unspecified time and in order to avoid that you have to sensitise your staff and give them PPE and sanitisers and this cost is not going away.”

Just like Mr Sembatya, Ms Nakowa believes companies must invest in occupational health and safety. How companies protect staff and customers from the virus will be key.

In terms of performance, Mr Sembatya advises that companies should explore strong partnerships to build resilience.

“Partnerships help you cut on the operational cost and improve efficiencies, businesses that manage their operations from top to bottom; production to point of sale should get wiser,” he says.

He believes some services should be outsourced, that will spread the risks to other players in case of anything.

“Reduce the multiple branches; bring on partners. All this will increase your efficiency, quality, adopt guidelines for your staff; generally manage costs by operating lean and you will survive.”

Mr Baker Byaruhanga, a risk management specialist and certified public accountant, observes that risk affects the objective of making profits and means to making that profit.

  “You must be prepared for both, the good and bad things that come in a business. This brings in the concept of risk management which can be internal and external,” he says.

He adds that risks fall under sector –based, organisational and non business like technology, government policies, financial risks where you have no control.
While the world works around how to live with Covid-19, it is here to stay until a new vaccine is found.  
“Covid-19 brought a ‘new normal’ and no one can claim they were ready. Although one can argue that some companies had a continuity business plan, people were actually caught off guard,” he sums up