When selected companies returned to business on 1 June 2020, they should already have had risk assessments and plans in place in accordance with the requirements for Level 3 lockdown.
They must also conduct worker education on COVID-19 and protection measures. Yet, at a recent briefing, the Department of Employment and Labour reported that, of those businesses it had inspected, 40 percent of private enterprises and 50 percent of SOEs were not compliant with the regulations. “Businesses need to go even further than these basic conditions if they want to mitigate the many risks they now face,” says Christopher Palm, Chief Risk Advisor at the Institute of Risk Management South Africa (IRMSA). He suggests several critical areas they must address on an ongoing basis. Revisit their vision, mission and strategic objects Even before opening, businesses should have reviewed their business model and adapted their strategic approach. They have to understand what about their business no longer works and what they must to do as each lockdown level becomes a reality. Perform a business impact analysis Just the OHS requirements can be onerous for businesses to implement, maintain and enforce as care is required for each and every location and duty. Organisations should carry out a business impact analysis that reveals the true cost of operating in that context. They may find they cannot resume business simply because it would be unprofitable to do so. Attend to immediate challenges Above all, companies must focus on cash management and liquidity first. Everything else a company does must be subordinated to this one objective. Assess normal business risks The biggest risk for companies is the impact of OHS requirements on their ability to operate. However, they cannot overlook typical business risks. They must quickly assess their current competitive advantages and disadvantages, especially in terms of their supply chain. If they cannot procure goods or services, they cannot continue. Create opportunities Having identified their competitive advantages, with a view to generating cash and building liquidity, companies will be ready for some tough decisions. They need to develop new ways of delivering their good and services to their market. Can they embrace ecommerce and home deliveries? Or should they sell their inventories off to atypical customers, rent out floor space, or hire out their expertise. In short, they will need to break the business mould and look for radical opportunities outside the norm. Assess legal commitments and exposures As the legal health and safety officer of their company, could the CEO be sued for murder if an employee dies because they did not implement the necessary precautions? A hairdresser in PE faces this situation after testing positive yet ignoring instructions to self-isolated, leading to the death of another. Companies must review their exposure to similar litigation, as well as their ability to comply with regulations both structurally and operationally. “Companies should accept that, when they open their doors again, they may need to be very different businesses than before to survive,” says Palm. They must therefore urgently reassess their strategic outcomes in light of new risks and opportunities, and pivot accordingly. ENDS MEDIA CONTACT: Rosa-Mari, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on IRMSA please visit: Website: https://www.irmsa.org.za/ Twitter: https://twitter.com/IRMSAInsight Facebook: https://www.facebook.com/IRMSAInsight/?ref=hl LinkedIn: https://www.linkedin.com/company/irmsa-institute-of-risk-management-sa/
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Written by Dr Arthur Linke, Member of the IRMSA Risk Intelligence Committee
The renowned World Economic Forum’s (WEF) 2020 Risk Report featured all of the Top-5 global risks as being climate-related risks. These included: Extreme Weather, Climate Action Failure, Natural Disasters, Biodiversity Loss and Human-Made Environmental Disasters. In this time of a pandemic crisis, we must reiterate the significance of climate risk, and that we need not look far to remember many acute examples of climate risks materialising. The wildfire disaster devastation on all continents except Antartica in the past several years comes to mind, with the Knysna Fires, South Africa’s single largest ever environmental disaster economically being a particular local case in point. Should an acute climate disaster strike in these pandemic times, the pressure on our human and economic resources would be compounded, and even more incomprehensible. That is another lesson of the WEF Risk Report – the interconnected nature of risks, as well as the fact that “big loss events” or “long tail events” as they are called are becoming more frequent, and more devastating. As an aside, the risk of pandemics also featured in the Top-10 high-impact risks in the WEF 2020 Risk Report. It has been in the report for years, highlighted in special focus sections, and in 2015 it was the second highest impact risk, based on the events of the time. Many may consider Covid-19 to be a Black Swan, but the WEF reports and other sources clearly indicate to us that the risk of pandemics has certainly been on the radar for a long time. We have had a number of “preview” experiences in the past years with SARS, MERS, Ebola etc. and thus this is a “known unknown”, sometimes referred to as a grey elephant or even a grey rhino, utilising an African wildlife motif. For those interested in déjà vu moments, the 1918 Spanish Flu pandemic is a precursor. John Barry’s classic book on this catastrophic scourge comes highly recommended, whereby 2020 is a 100-year pandemic flashback all over again, with one of the few differences this time around being the Internet. We would do well to remember that when rating, assessing or evaluating risks and planning scenarios, we should always consider the worst-case possible scenario of raw or untreated risk (imaginable or even unimaginable) as a starting point. The main lesson, however, to draw everyone’s attention back to, is that climate risk is a slow (but accelerating) creep, like the analogy of the frog in hot water that doesn’t notice the temperature headed to boiling point. Similar to Covid-19, many seem to have so divergent and fervent opinions of climate risks. While we may not be headed to immediate boiling, we are certainly raising the temperature of our planet and our carbon emissions in an unprecedented way. Just like we weren’t prepared enough for Covid-19 despite all the warning signs (some being more prepared than others), we are not sensing the gravity, not preparing enough as a collective for climate risk, and not increasing our resilience. The insurance sector is one of the first sectors that has had to react directly to climate risk – fight or flight. Another IRMSA Risk Chat featured Environmental Social and Governance (ESG) reporting and what it means, but basically there are three factors impacting the insurance sector with regards to climate risk, and two of them have to do with ESG. The more apparent risk is that insuring assets threatened by climate risks e.g. properties by fire, flooding etc. is becoming less predictable and not financially viable as “big loss events” or “long tail events” become more frequent and more severe. There is something called the Risk Protection Gap (RPG) which represents those assets that are not protected (primarily not insured) against risks which is growing, also in part as a result of assets becoming non-insurable due to climate risks, all this to the detriment of global society and often the most vulnerable (another catastrophic slow boil). Drawing attention back to the Knysna Fires that presented us with not only South Africa’s largest environmental disaster in terms of economic impact, but the several billions of Rands of damage were mostly insured. This motivated the insurance sector to promote risk treatment and risk resilience going forward to be able to cover similar assets - if these can ever be covered at all again in terms of rising premiums and limited/no insurance possibilities. In terms of ESG, both insuring and holding of “dirty assets” is no longer acceptable to clients, shareholders and other stakeholders. Besides lawsuits and reputational damage, the first clients have completely declined to contract insurers covering coal, oil and gas manufacturers, and the assets themselves, shares in US Dollars tens of trillions worth of companies, many of them “dirty”, may significantly reduce in value and become “stranded” over the coming years, for example, as we shift to renewable forms of energy. Renewables represent an excellent opportunity to increase resilience to climate risk. So, whilst there is some change, growing awareness of climate risk, industry disruptions and a shift to a low carbon economy, these are occurring at pace that is just too slow. Prof Bent Flyvbjerg of Oxford University in a recent posting reiterated that when it comes to the “tail end” of risk, the most unlikely events, we just don’t know the limit of possible outcomes. The Covid-19 pandemic has shown us this – almost unimaginable outcomes of a "known unknown". He went on to say that; “Many have rightly observed that Covid-19 may end up being a mere dress rehearsal for the biggest and most urgent tail risk we face today: climate change. If climate science is right – and there is no reason to think it is not – the law of regression to the tail will be particularly pertinent here. It tells us that massive loss of life and wealth will likely follow if climate change is not treated now, at speed, and at unprecedented scale, with no time to waste in each step involved.” In other words, if the unknown outcomes of a relatively known risk event like Covid-19 have been treated in the way they were globally and can have these devastating consequences as we are seeing today, imagine how these outcomes might be for climate risk scenarios that are unprecedented for our planet. The economic or wealth outcome referred to is important – financial planning and financial resilience is one of the biggest factors of overall resilience, that is why we save for a rainy day (or not). Looking for an upside, anecdotally, Covid-19 has been good for climate risk. People talk about the great weather we’ve been experiencing of late (coincidence?), satellite pollution maps of South Africa and most other countries clearing up, birds everywhere and dolphins swimming in the canals of Venice (fake news, sorry). Every risk has its opportunity, for example solving our energy needs now in a more sustainable and resilient way through renewables. Why build an expensive, vulnerable power plant, when a distributed power array will solve our needs? Do we really need to travel and choke our way through smog and peak hour traffic to every meeting? Hopefully we learn these lessons, but as risk managers, we must go further, take up the baton and imagine the unimaginable consequences in the big picture. Ultimately, the current crisis should elevate the strategic importance of the risk management function and the influence it has. We should take advantage of the opportunity this crisis offers - exploiting the valuable lessons learned from the Covid-19 pandemic and improving our resilience for the next crisis. ENDS MEDIA CONTACT: Rosa-Mari, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on IRMSA please visit: Website: https://www.irmsa.org.za/ Twitter: https://twitter.com/IRMSAInsight Facebook: https://www.facebook.com/IRMSAInsight/?ref=hl LinkedIn: https://www.linkedin.com/company/irmsa-institute-of-risk-management-sa/ ​Applying the humble principles of environmental, Social and Governance during the covid-19 crisis11/5/2020 Written by: Dr Anushka Bogdanov, Risk Insights, IRMSA Corporate Member
The coronavirus is an unexpected and unplanned global catastrophe, and corporate South Africa has no choice but to step in and assist its employees, however difficult it may be. Already we are seeing some evidence of this and companies that are rolling up their sleeves are to be applauded. In these current uncharted waters, proactive governance and managing social aspects both from within and outside company offices are paramount, not only for sustainability but also for survival. In this respect we should remind ourselves of what Nelson Mandela said when it came to a society coalescing: "If you want the cooperation of humans around you, you must make them feel they are important and you do that by being genuine and humble." Right now, a little humility will go a long way. During any time of crisis companies need to re-focus on the important principles of ESG - Environmental, Social and Governance – which refers to the central factors in measuring the sustainability and societal impact of an investment in a company. This philosophy is now even more pronounced after Government’s declaration of a National Disaster and a weeks-long lockdown which makes the national executive primarily responsible for co-ordinating measures for the mitigation, prevention and recovery and rehabilitation from disaster. This in turn means companies have to be responsible for implementing many of these measures. It also means company leaders will find themselves working in a completely different and untested paradigm and will have to adapt quickly. They will have to ensure continuity management in the organisation, taking heed of the wellbeing of its employees at all times. Doing this correctly can only enhance the reputation of companies during this difficult time. Organisations can also use the Corona pandemic as an opportunity showcase their ability to adapt to real crisis management, practically demonstrating robust governance. Disclosure of proactive policies and processes by companies also provides an insight to how well the S (social) component of the ESG impact is being taken into account. The management of human resource policies and supply chain disruption provides insights to the G (governance) of the ESG of companies. This will provide investors and society with strong insights into companies that have a better chance in getting out of the crisis stronger and more productively if they are led by ethical leaders who have taken into account sustainable human capital – the S in ESG. Boards of directors and management also need to be fully aware of the Corona impact on the brand and strategic reputation of companies. The kind of support companies need to provide to their employees ultimately assists in flattening the curve of infection which will range from its supply chain management, work from home, resources and infrastructure, paid sick leave and taking the elderly and pregnant women into account. It’s also incumbent on corporate leadership to critically and constantly evaluate the dissemination of crucial information regarding the virus to assist employees in making informed decisions. By doing this companies are reflecting their investments in people but unlike other investments, the dividend will be reaped in creating sustainable competitive advantage and a loyal productive workforce. It also goes without saying that as part of its governance employers have a legal obligation to ensure a safe workplace. Now more than ever before a company’s work practices directly affect their ability to contain the virus and manage business disruptions in general. So critically ask yourself what key questions do you need to ask yourself right now:
MEDIA CONTACT: Rosa-Mari, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on IRMSA please visit: Website: https://www.irmsa.org.za/ Twitter: https://twitter.com/IRMSAInsight Facebook: https://www.facebook.com/IRMSAInsight/?ref=hl LinkedIn: https://www.linkedin.com/company/irmsa-institute-of-risk-management-sa/ |
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