Opinion by Craig Kent, Head of Risk Management at Aon South Africa
The world is still reeling from the enormity of the impact of the COVID-19 pandemic on our seemingly ‘normal’ operations and lives. For businesses, there have been significant disruptions in how strategic, operational and external risks are viewed and handled, many of which have been amplified by the influence of the pandemic.Â No matter which way you approach it, COVID-19 has fundamentally changed the parameters for business of what constitutes success in the future, and how risks will be measured and mitigated.
What is very clear is that what leaders and risk managers may have thought are likely risks to be faced in their business operations has been given a big dose of reality and lousy-tasting medicine.Â Without discounting the known and ‘typical’ business risks - these were with us before the pandemic started and will continue to be relevant â€“ however their rating on our risk registers and their influence over our medium to long-term plans has very likely changed.Â The realisation that no risk is too far-fetched or unlikely to occur is rapidly settling in.
Winston Churchill once said: “Never let a good crisis go to waste”.Â There is much correlation with where Churchill found himself and indeed the world as they emerged from the devastation of World War II, and how we navigate our way forward as we emerge from this globally synchronous pandemic disaster.Â
A business response to risk should be based on a solid, resilient and flexible risk framework that is supported from the top to the bottom. The success of the reaction process to a perceived or imminent risk hinges firstly on how informed the risk framework is in terms of operational, strategic and financial factors related to the business, which requires reliable data in real time; and secondly requires a structure that efficiently interrogates and interprets this data once placed in the framework for processing and appropriate response.
Well-formulated risk programs that complement the business structure and plans underpin the information required for the board to make timeous and informed decisions on both known and unknown exposures. This is where risk transfer starts to play a significant role as the business identifies what risks it is comfortable facing on its own through self-insurance tools, and what risks need to be transferred to an insurer. It’s a delicate balance that requires serious discussion with expert brokers and risk advisors in the field.
COVID-19 lessons for long-term risk management and strategic planning
Going into 2021, it is wise to interrogate the many important lessons learned in 2020, and how these will influence short, medium and long-term business planning in the face of an unprecedented crisis. Aon unpacks the key lessons and factors to be considered as businesses move into the recovery and beyond phase of the current pandemic.
Lesson #1: » Legal and compliance
Lesson #2: » Stakeholder disclosures and guidance
Lesson #3: » Strikes, riots, civil commotion, malicious damage
Lesson #4: » Cost management / reductions
Lesson # 5: » Relief, insurance and alternate risk transfer
Lesson #6: » Liquidity
Lesson #7:vMergers and Acquisitions
Lesson #8: » Cyber Risk
Lesson #9: » Changing property market
Lesson #10: » Failure to innovate and meet customer needs
“The only certainty is that the future is uncertain” has been the clarion call for 2020, and with 2021 promising its fair share of uncertainty, it is crucial to take what we have learned from the pandemic and apply it to our long-term risk management and strategic planning. The world is a very different place in so many fundamental ways.Â This makes it crucial to interrogate your risks and to put a flexible, robust and adaptable risk framework in place - a task best undertaken with an expert broker and risk advisor by your side.
It is here where Aon’s data-driven insights provide value and opportunity.Â As specialists in risk mitigation, risk and business continuity management, we implicitly understand the need to always stay ahead of the curve.Â COVID-19 â€“ and future pandemic risks - will without a doubt continue to test every organisation’s resilience planning in future and there is still much unchartered water to cross.Â What is not unchartered is our response to it. It is here where Aon’s fact-based insights, processes, skilled people and technology platforms ensure optimal decision making and functionality to provide you with a solutions-based management approach to insurance and advice, combined with a risk management strategy to help you protect your people, assets and brand, now and into the future with certainty and stability.Â