 The latest listed entity to meet the wrath of investors is Tongaat Hulett, who indicated earlier that it may have to restate its 2018 financial statements following a comprehensive review of “certain past practices”.
The share price has been bludgeoned and billions of rands have been wiped off its market value. Other big players such as Steinhoff, KPMG, Enterprise and Volkswagen have also felt the pain when they misled customers and investors. South African companies have no shortage of guidance on best practices in risk management and auditing with a myriad of ethics and good corporate governance codes. It is then no surprise that the market punishes those who do not live up to their “commitment” to integrity, competence, responsibility, accountability, fairness and transparency. The ripples of brand and reputation damage go beyond the firm and its auditors. Investors and their investment decisions are based on, amongst other things, audited financial statements that are supposed to give assurance of the integrity and credibility of companies’ financial performance. What happened at Steinhoff, Enterprise and Tongaat Hulett, significantly impacts investment choices and returns where hard earned income of people saving for their pensions are now lost or at least significantly reduced, says Christopher Palm, Chief Risk Advisor of the Institute of Risk Management South Africa (IRMSA). Pointing fingers – in the wrong direction Ironically enough the 2019 IRMSA risk report shows that companies consider governance failure in the public sector – not amongst themselves – to be one of their biggest risk. The loss of reputation and severe brand damage is number 17 out of the top 20 South African Industry risks highlighted in the 2019 IRMSA Risk Report. However, Palm says recent corporate failures place the effectiveness of risk management once again under the spotlight. “I think there is a lot to be said for organisation’s risk profiles not receiving enough thought in the organisation.” This goes for the board, the audit and risk committees and management. Effective defences Effective governance has three lines of defence; strong leadership, effective safeguarding functions like risk management, governance and compliance combined with assurance from a strong internal and strong independent external audit functions. When a company has all of these defences in place, but does not consider its effectiveness and the way it is integrated into better decision-making it is purely for compl,iance purposes, he says. Risk management is all about highlighting risks and opportunities to allow boards and the leadership of an organisation to make the best possible decisions, says Palm. A company must consider the following when the board and the executive leadership debate the organisation’s risk profile:
If you measure only financial performance, this is what drives the behaviour in the company. “Companies are not forward-looking enough. The changing environment Palm warns that consumers and investors, especially younger generations, are already considering companies differently. The Youth is not only looking at profits and returns on shareholder money but increasingly demanding leadership with integrity, good corporate citizenship, necessary social investments and a responsible return on investment – all of this, made possible in a way that respects the environment. They consider at which cost it was achieved, and who is really benefiting from their actions, says Palm. ENDS MEDIA CONTACT: Rosa-Mari, 060 995 6277, [email protected], 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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 In celebrating Youth Day, we are reminded that the uprising that began in Soweto more than 40 years ago was all about education, and how it profoundly changed the socio-political landscape of the country.
Today structurally high unemployment, growing income disparity and inequality as well as inadequate or substandard education and skills development count under the top five risks facing our country, says Christopher Palm, Chief Risk Advisor of the Institute for Risk Management South Africa (IRMSA). According to the 2019 IRMSA Risk Report industry sees inadequate and substandard education and skills as the second biggest risk for companies. The latest statistics on unemployment shows that the biggest burden of unemployment falls on people aged between 15 and 34 years. According to Stats SA they accounted for 63,4% of the total number of unemployed persons during the first quarter of this year. The youth aged 15–24 years are the most vulnerable in the South African labour market as the unemployment rate among this age group was 55,2% in the reported period. The danger of a disillusioned youth How we respond to these risks are critical, says Palm. In the IRMSA report the growing disillusionment among the youth of South Africa is highlighted. The report warns that it could lead to a youth-driven protest movement, on a much larger scale than the student protest movement. “Such a movement, if led and supported by other population groups in the country, would hold a particular challenge for the general political and social stability of the country...” Palm says this is a real consequence if we do not get unemployment and our education system in order. Palm also suggests that identifying the most effective risk treatment options require both the public and private sectors as well as our career advisors and learning institutions to better understand the future skills requirements; this is best achieved by engaging the risks and opportunities presented to us by trends like the Fourth Industrial Revolution and future thought leadership insights provided by the Institute for Futures Research at Stellenbosch. To identify and understand what future skills are needed and to align country and industry skills planning with the ability of the educational system to deliver is a critical success factor in addressing the risks highlighted above. “The youth must know what the skills of tomorrow are going to be; it is said that the skills that will be needed 10 years from now haven’t even been given names yet. We need to respond and get this right NOW; if we don’t, the system will not allow us to align quick enough to enable our labour market to produce these skills when it is needed. We will end up with skills that are redundant by the time students start their careers and South Africa will not be able to exploit the global opportunities presented by the fourth industrial revolution.” The folly of quick fixes The report quotes American economist Joseph Stiglitz who wrote in his book Price of Inequality: “If a country doesn’t give a large proportion of the population the education that they need to earn a decent living, if employers don’t pay a decent wage, if society provides so little opportunity that many people become alienated and demotivated then that society and its economy won’t work well”. It also does not help to “give” people an education for the sake of the numbers; they must be able to do the work and to realise the values of significance and self-reliance. The folly and ineffectiveness of “quick fixes” has to be emphasised. For IRMSA it is a year of risk activism and the Institute wants to make a difference in not just highlighting country and industry risks but also capacitating leadership and the risk profession to make a difference. The IRMSA report reiterates the importance of a “social pact” and the need to align socio-economic programs towards youth investment. At IRMSA’s conference in October and their Awards Gala Dinner in November, they will focus on the youth and recognise and honour public and private companies that are addressing the risks relevant to the youth with innovative and supportive initiatives. Several professional associations (such as the Actuarial Society of South Africa, Project Management SA and the Association of Chartered, Certified Accountants), represented by the South African Graduate Employers Association (Sagea) are already involved at school and university level to promote careers where there are skill shortages, or where there is insufficient information about career opportunities in specific professions. In around 28% of the cases associations are involved in career promotion activities because they need to improve the “attractiveness” of their profession. At school level the associations are involved in presentations to learners (17%), they are present at career expo’s (17%) or they are sponsoring related events (14%). Around 7% of the associations who participated in a recent survey by Sagea provide bursaries and 3% offer job-shadowing opportunities. At university level most offer presentations to students (21%) or they offer guest lectures (15%). Around 12% make use of university career fairs to promote their professions and 7% offer bursaries. “We will honour those who, amongst many other innovative ways to treat the risks spoken about earlier, make schools safer, assist with skills development for educators, and who provides learnerships, apprenticeships and the like,” says Palm. ENDS MEDIA CONTACT: Rosa-Mari, 060 995 6277, [email protected], 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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