By Mandlakazi Gcasamba CA(SA)
Usually, in a crisis, we tend to focus on managing the situation rather than taking a step back and looking at the bigger picture – which is risk management.
I believe that complicated situations can be solved by approaching them from basic principles that can guide the company on what strategy to follow in light of these times and other challenges the company may face. The risk is that many decisions will be made to manage the short-term without careful consideration of long-term effects, which are crucial to the company’s sustainability.
The first one that I will be sharing is the importance of Risk management and Compliance
This has highlighted the importance of risk management and how necessary it is to integrate it across the business as a working tool that drives decision-making and processes rather than a compliance metric.
I’ve been quite fortunate to have worked in smaller sized-entities where compliance and risk management have been a significant driver of understanding our business and its environment.
For most, this goes back to basic business principles such as:
- SWOT (Strengths, Weaknesses, Opportunities, Threats) / PEST (Political, Environmental, Social, Technological) Analysis
- Porter’s five forces: The threat of new market players, the Threat of substitute products, power of customers, power of suppliers, industry rivalry, which determines the competitive intensity and attractiveness of a market.
Understanding how your business is exposed to, and leveraging these factors, will be crucial in determining your strategy, which can be:
Cost leadership or differentiation strategy- If you’re a cost leader, you will need to deeply understand your costs and how to reduce them continually. If you’re a differentiator- you need to understand your customer’s needs and preferences.
These basics, alongside good governance- if understood and continuously reassessed and communicated, can be vital in determining the overall strategy, culture, and decision-making across the company.