Are we still going to neglect risk management? – by Unnati Agarwal

Chances are that you recently finished the risk assessment for your company and then all of a sudden – the COVID-19 emergency hit, forcing businesses and brands to take an unwanted pause.  It is clear that not even the most insightful person could have predicted the beginning of 2020 and that a global pandemic (with no vaccine) could turn the world upside down. This has undoubtedly exposed many devastating failures amongst industries and the organisations. Having talked about risk management and COVID-19, this article is going to take you through the emerging risks since COVID-19 outbreak thereby highlighting the importance of risk management.

While the world anxiously waits for the vaccine, companies have been seen transitioning to a new normal. Unemployment rates have skyrocketed and public health crisis has escalated in almost every country. Despite all the regulation and changes that the government is trying to bring, the pandemic continues to affect many industries. S&P Global recently prepared a report about the industries most affected by the virus. According to the report, the most impacted industries include airlines, casinos and gaming, leisure facilities, auto parts & equipment and oil & gas drilling. The current crisis has also made consumers rethink their consumption habits and Accenture’s COVID-19 Consumer Pulse Research report has shown that this pandemic is likely to alter consumer behaviour permanently. They believe that there is no going back to pre-pandemic world. What does it mean for the brands and companies? Amidst the chaos created by the pandemic, 40% of consumers are stocking up on kitchen supplies, hence grocery stores and supermarkets are experiencing 80% spike. But on the other hand, 70% of the consumers prefer home cooked meals so restaurants and eatery outlets have seen a 90% decline in visits. Besides this, we also saw that the Indian economy shrank 23.9% year-on-year in the second quarter of 2020. With this, it is clear that COVID-19 is going to keep the economy sick for a long time.

But what does all this have to do with risk management? Here, I want to highlight an interesting study by Cabinet Office, London. According to the National Risk Register of Civil Emergencies, 2017 edition – a pandemic is the biggest risk with an impact severity of 4 out of 5. The Gartner Risk and Audit Practice – the leading research and advisory company’s Business Continuity Survey demonstrated that only 12% of the organisations were highly prepared for the impact of coronavirus. This figure demonstrates that many organisations were scrambling up to find solutions and respond to the caused emergency. Therefore, our point here is that there is a need to put effective risk management strategies in place. The pandemic has proved to be an eye-opener for many organisations – it has suggested that they must take the findings seriously and prepare for the highest potential risks.

Now it is important to understand that precaution is not risk management, denial is not risk management. Chinese authorities claim that strains of the spread of COVID-19 was discovered in late December and they reported it to the WHO for further research. The rest of the world had a two months time to act to prepare for an increase in infections but how did they act in February? It was by denying that there was any risk in their countries. While hospitals were flooded in Wuhan to tackle the situation, nothing was done in other countries to prepare for the pandemic. Now when people are saying that the lockdown is helping in slowing down the virus spread, it is like saying that killing the patient cures the cancer.

I want to implicate that simple risk reduction and assessment measure beforehand could prove beneficial for the organisations as well as others. Let this be our wake-up call. When COVID-19 passes and becomes a mere story of an infectious influenza, let risk management still be conducted from the analysis of consequences, not the fear of them.

Enterprise Risk Management is important because its success determines the health and life of the entire business enterprise. Having a formal education in the same helps one develop a deeper understanding of identifying the company’s risks and opportunities. For the last 30+ years, the Institute of Risk Management is the world's leading body for enterprise risk management professionals across 143 countries. It provides globally recognized qualifications with designations, customised industry training programs, publishes research and guidance and sets professional standards.

Quotation – “The secret of crisis management is not good vs. bad, it’s preventing the bad from getting worse.” – Ken Matos

Submitted by – Unnati Agarwal

Member - Student Risk Committee at the Institute of Risk Management - India Chapter.