By Monica Ngage
The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities and businesses worldwide. it’s been estimated that, if the corona virus spreads uncontrollably, it could all right cost the world economy somewhere around $2.7 trillion. This is just an example of the various risks that a business is probably going to face.
What is risk management?
It is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.
What are the sources of risks?
Risks can come from various sources including uncertainty in financial markets, threats from project failures (at any level of design, development, production, or sustaining of life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root cause.
There are two sorts of events i.e. negative events, classified as risks and positive events, classified as opportunities.
How can we manage risks?
There are 6 steps involved in managing risks:
- Identify the risk-You cannot resolve a risk if you do not know what it is. Imagine a project in progress and think of the many things that can go wrong e.g late deliveries, curfews, cessation of movement like the one we are experiencing in Nairobi, Mombasa, etc. Once this is done, you need to put down all identified risks in a risk register.
- Analyze the risk– At this point you have a risk register; so what are you going to do about these risks? You need to determine the likelihood of these risks happening . This information needs to be included on the risk register. Analyzing risk is hard. There is never enough information you can gather. Of course, plenty of that data is complex, but most industries have best practices, which might facilitate you along with your analysis. You would possibly be surprised to get that your company already has a framework for this process.
- Prioritize the risk– After the qualitative and quantitative analysis of the risks, you will establish that all risk are not equal. Some will take more resources than others should they occur. At this point you need to categorize your risks as being high, medium or low. Some risks are going to require immediate attention. These are the risks which will derail your project. Failure isn’t an option. Then there are those risks that have little to no impact on the project’s schedule and budget. A number of these low-priority risks may be important, but not enough to waste time on and might be somewhat ignored.
- Assign an owner to the risk– Identify the person who is responsible for that risk, identifying it when and if it should occur and then leading the work towards resolving it. There may be a team member who is more skilled or experienced within the risk. Then that person should lead the charge to resolve it. Or it might just be an arbitrary choice.
- Respond to the risk– First you need to know if this is a positive or negative risk. Is it something you may exploit for the betterment of the project? Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or a part of the threat to a different party, and even retaining some or all of the potential or actual consequences of a specific threat. The opposite of these strategies can be used to respond to opportunities (uncertain future states with benefits). You then act on the risk in order of priority.
- Monitor the risk– After responding to the risk, you would like to stay check if the plan is functioning. Whoever is in charge of the risk will be one to track its progress towards resolution.
In conclusion, we must underline that during such situations, as in every period of adversity, changes in the market bring a lot of risks, but they can also create new business opportunities and drive innovation in businesses and sectors.
Digital media & home entertainment, as well as social media companies, are already seeing an uplift in revenues, as an increasing number of consumers opt for solutions that allow them to continue enjoying their hobbies and communicate with others, all from the comfort of their home.
In short, the sooner a company detects the potential threats posed by the corona virus crisis or any other risk and organizes a robust defense and response plan, the greater the possibilities of overcoming this crisis with the minimum possible losses, adapting to the new context, and recognizing new areas of endeavor.