Last week’s suspension of Comair’s licence to fly because of safety concerns is clearly a crisis for any airline. While the Civil Aviation Authority announced today that they have lifted the suspension, the incident serves as a reminder of the imperative for boards to identify and manage key risks proactively, says Parmi Natesan, CEO of the Institute of Directors in South Africa.
“In King IV, the governance of risk is one of the 16 Principles that underpin a successful and sustainable organisation and is thus a key board responsibility. Boards have to identify what the organisation’s key strategic risks are within the context of the industry in which it operates,” she says. “Clearly, an airline needs to be able to fly, so anything that could prevent it from doing so has to be proactively managed. Such risks would include natural disasters, damage to the fleet, loss of talent and more—including the temporary loss of a licence to operate, as we saw with Comair.”
Boards thus need to ensure that such risks are on the organisation’s risk register, and that they are being actively managed. For any airline, safety would generally be one of the top risks because it potentially affects not only the company’s ability to earn revenue but also human life. The board has to be hyper-vigilant about such a risk, and a key mitigation strategy would be to ensure compliance with all applicable laws and regulations, coupled with a well-designed set of internal checks and indicators so that the board can be informed timeously that safety risk is not being effectively managed.
“This type of risk doesn’t materialise out of thin air—it’s foreseeable. Safety is very much top of mind for airlines because the consequences of an accident are so dire, and the board has to be in a position to monitor how well it is being managed,” says Ms Natesan. “If, despite this, the risk happens to materialise, boards must also have a crisis communication plan in place to manage public perception and reduce the inevitable reputational damage.”
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