The risk agenda

The financial crisis saw over $50 trillion in wealth being wiped out as well as several banks. The rise of emerging markets combined with globalisation, the impact of data technologies, the increased influence of external stakeholders and continued repercussions from the aforementioned global crisis all now combine in a landscape of uncertainty and complexity.

The fast-changing African marketplace is causing many companies to initiate business transformation programmes to better position themselves and also to allow a clearer strategy regarding risk appetite, risk attitudes and approaches, while considering investing or operating on the continent.

Company boards and management in Africa are now, more than ever, under pressure to reform how risk is assessed and then to monitor the effect of such risk on their organisation’s performance. Threequarters of CEOs in our Africa survey say that they anticipate changes to their risk management strategy this year. Each director should understand the company’s key risks and be comfortable that management is appropriately addressing those risks.

When 2011 brought the tsunami in Japan and floods in Thailand, many companies were surprised at how these distant disasters affected their supply chains. Around the world, companies realised they needed to address unexpected or unplanned risks. It’s the same for directors, as they are concerned about the risks that are around the corner, ones their companies cannot see yet.

This points to the need for proper crisis management plans. In our survey, CEOs are roughly split between those who say that risk management is centralised (54%) and those who say it is decentralised (44%) in their organisations. The majority say that they dedicate more risk management resources to predicting high-impact events (56%); fewer say that they dedicate resources to recovering from risk events, should they occur (41%).

Tarek Cherif, President of Groupe Alliance in the chemicals and construction sectors and of CONECT, an employer representation organisation in Tunisia, puts an emphasis on a predictive approach and on selectivity with regard to risk management. Growth accompanied by high risk is, according to him, ‘incompatible with the size of our companies, which tend to be small or medium sized, as the appearance of a significant risk could push them under’.