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Key 2021 Business Risks: Business Continuity Plan is Imperative!

Here are10 risks facing businesses in 2024

While we agree with the popular saying that “No pain, No gain”, it seems that the pains/challenges of many business leaders are pouring like rain. In a recent report by KPMG, businesses in Nigeria will face different types of risk in 2021 with about 10 identified as key risks. These include Regulatory risk, Fiscal and monetary risk, Foreign Exchange volatility risk, Cyber-security, Political risk, Technology infrastructure risk, Customer attrition risk, Talent shortage/attrition risk, Business continuity risk and Governance risk.

In addition to these, we also have the Global Risks that every business will directly or indirectly face irrespective of their location. The top 10 according to World Economic Forum in terms of likelihood and categorised based on impacts are; Climate action failure; Weapons of mass destruction; Biodiversity loss; Extreme weather; Water crises; Information infrastructure breakdown; Natural disasters; Cyber- attacks; Human made environmental disasters and Spread of infectious disease. To better understand the numerous risks, they can be categorised as Economic, Environmental, Geopolitical, Societal and Technological risks. Moreover, in addition to these national and global risks, every business faces internal risks such as Internal fraud; External fraud; Employment practices and workplace safety; Clients, products and business practices; Damage to physical assets; Business disruption and system failure; Execution, delivery and process management.

Read also: Key 2021 Business Risks: Business Continuity Plan is Imperative!

With these multitude of risks, the question is how businesses should respond, manoeuvre or mitigate to remain profitable and sustainable. In a random study, it was noted that over 70% of Nigerian firms don’t have a Business Continuity Management plan and this can be attributed to lack of knowledge and understanding, lack of commitment, lack of budget provision, absence of corporate buy-in and complacency. The follow-up question is how they manage the above litany of risks. Reactive and poorly is the answer! That is the reason why most Nigerian firms are characterised by Ineffective management action, Increased costs and inefficiency, Firefighting and reduced morale, Loss of key staff and customers, and Major business interruption or failure. To further affirm this disturbing situation, another random study using levels 1-5 to assess the level of effective risk management awareness and practice across Nigerian firms revealed that while middle and junior employees scored about 1/5, senior management and board members scored about 3/5. This gap further affirms the reactive approach to risk management across our firms.

With Covid 19 and other emerging global, regional and national factors changing everything about our life, it is imperative that businesses quickly rethink their strategy to risk management in order to remain profitable and competitive. This approach entails deep understanding and application of the concept of risk advantage within the framework of Enterprise Wide Risk Management. According to Boston Consulting Group, Risk advantage is the ability to systematically manage the uncertainty inherent in any given strategic position in order to generate attractive return with less risk taken. The goal is not necessarily to eliminate risk, rather it is to reduce and manage surprises.

From the above definition, it can be deduced that the first step to achieving and embedding the practice of risk advantage is to have a properly prepared and practicable Business Continuity Plan (BCP). This will be a holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience with the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities (ISO22301: 2012). The emphasis is on having a management system in place that establishes, implements, operates, monitors, reviews, maintains and improves business continuity. In a layman’s understanding, Business Continuity Exercise is like carrying out a Business Impact Analysis of the challenges facing the business with an aim to develop ameliorative strategies for the continued growth and performance of the business.

As a well-developed Business Continuity Plan helps to reduce uncertainty, instils confidence and enables competence for sustainable and superior performance of a firm, it is important that it is embedded as part of the culture of a firm. Interestingly, this can be achieved through a four-stage process that includes: First, detailed understanding of the firm. Second, careful determination of the appropriate business continuity management strategies. Third, effective development and implementation of a business continuity management response and fourth, regular exercising, maintenance and review of the plan. While some CEOs complain that carrying out a BCP is expensive and complex, the interesting aspect of the exercise is that the benefits always outweigh the costs. Moreover, it can be done in phases and with minimal costs. Irrespective of the method used, what is of central importance in the development of a BCP is the actual testing of the plan to ensure effectiveness and robustness. This too can be done in a progressive way that is cost effective starting from component and module tests and then increasing to linked tests and disaster drills.

With a focus on the COVID-19, what is required in the first instance is for businesses to understand and appreciate that while it is primarily a health challenge, the socio-economic implications of COVID-19 are wide and complex. Having such mindset is necessary for the development of an effective BCP. It will help in having a holistic assessment of the impacts of COVID-19 not only on the firm but also on all the stakeholders of the firm. These include but not limited to employees, input suppliers, buyers, communities, government, and competitors. With such detailed appreciation and understanding of the complex consequences of COVID-19, a firm will be better informed of the challenges it faces and the short, medium- and long-term strategies required to ameliorate and solve the challenges. As earlier pointed, while a detailed BCP plan can be expensive to develop and test, it can also be done in a most cost-effective way and tested using the talk-through method. What is important is to ensure that whatever testing method used passes the criteria of being stringent, realistic and minimal exposure of the firm bearing in mind the wide benefits of a well formulated Business Continuity Plan.

Dr. Ngwu, is an Economist/Associate Professor of Strategy, Risk Management & Corporate Governance, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- [email protected]