RISK MANAGEMENT 2010 – COMPLY OR EXPLAIN

In 2010, all business owners in South Africa will be given a choice within the new Companies Act legislation and King III Commission guidelines, to ‘comply or explain’ their position on formal Risk Management processes. Similar legislation is being or has been enacted in many parts of the world; yet another global phenomenon. So far so good, but what are the issues?

1. There are far too many business entities in SA for the authorities to quickly and effectively police the implementation of legislation.
2. Risk Management is generally perceived as a costly, time-consuming, complex and a boring issue; greyer than insurance.
3. Ignorance abounds regarding Risk Management and legislation relating to it.
4. Expertise and solution suppliers are few and generally expensive.
5. Business owners are in the higher pressure section of the business cycle, mainly due to economic circumstances.

 

So Risk Management could end up being treated as a dull cousin of AIDS and global warming, but with far fewer supporters, denialists and activists.

There are some positives though:

1. We all practice some form of Risk Management, usually informally.
2. You can discover business opportunities in the process.
3. Corporate and Government operations will not escape scrutiny and will tend to deal with those entities who share their protocols, imperatives and cultures.
4. There is a social police force to comply or explain to as well as the regulators; you, your family, shareholders, customers, suppliers, banks, insurers and so on. The list is long.
5. This is an international business initiative with a sound logical and intellectual foundation.
6. Business risk assessors such as banks and insurers can supplement existing information requirements with Risk Management profiles.
7. The practice of Risk Management gives you a semblance of control, enabling you ‘thrive not survive’ in the business cycle.
8. Support systems are available from as little as R3,500 per year, including VAT.

So the choice to exercise this preferred and legislated business imperative is to some extent in your hands, in the same way that your risks are your own. You can expect pressure to adopt formal Risk Management practices from other stakeholders over time though.

Will you be complying, explaining or embracing Risk Management in 2010?