Don't allow your company to be exposed to unnecessary risks, says Indwe Risk Services’ Peter Olyott.

By Ian Armitage

Businesses face risk every day. In fact, without risk a business or organisation would not grow and thrive.

Risk Management, according to the UK’s Institute of Risk Management’s definition, is “the process, which aims to help organisations understand, evaluate and take action on all their risks with a view to increasing the probability of their success and reducing the likelihood of failure”.

Risk management, it says, “gives comfort to stakeholders” -- meaning shareholders, customers, employees and so on -- that the business is “effectively managed” and enables “the organisation confirm its compliance with corporate governance requirements”.

So what is risk then?

"Risk is the difference between what you expect to happen and what actually transpires," says Peter Olyott, Executive Head: Operations of Indwe Risk Services. "Risk management is then the process of identifying risks to which a certain organisation is exposed, evaluating these risks in terms of how often they may occur and how serious the impact may be.”

Once this exercise is done, he says, the next step will be to determine how best to manage or treat these risks.

“Effective risk management is used to underpin the strategy of an organisation. If used effectively, it provides the organisation with a level of competitive advantage and if applied poorly or incorrectly, may have the opposite effect.

“Why is risk management important? Let’s be honest, businesses are vulnerable to a range of threats which can change constantly,” Olyott adds. “No business exists in isolation to the world around it and consequently leaders of the business have a responsibility to the stakeholders of the business to effectively manage the risks to which the organisation is exposed. “

Risk Management, he stresses, is relevant to all organisations whether they are in the public or private sector, or whether they are large or small.

“It should form part of the culture of the organisation, with an effective policy and programme led by top management with clear responsibilities laid down for every manager and employee to be involved in the management of risk,” Olyott says.

It supports accountability, performance measurement and reward thus promoting efficiency at all levels.

“It is very important to understand the purpose of risk management, as it is important to understand what risk in fact is,” Olyott continues. “Risk is characterised by a degree of uncertainty. Where there is certainty as to the expected frequency and severity of events, the risk reduces. Conversely, where there is a great degree of uncertainty as to both the severity and frequency, the risk increases. “

He says risk management is hugely beneficial.

“How can it benefit an organisation? Several ways. I guess first off it means there are no unpleasant surprises. The risk of unexpected risks occurring is greatest at the onset of a risk management programme and gradually diminishes as the programme grows in maturity. Second, if you manage risk effectively it means you can gain an advantage over its competitors. Also, effective risk management allows companies to recover faster and more economically should the worst happen. Thirdly, often a particular risk is created in terms of the law and an effective risk management programme allows companies to operate successfully and comply with the laws to which they are subject to.”

Olyott adds that a well-managed business will ultimately benefit from a better-priced and structured insurance portfolio.

“Risk management will also create a safer work environment for your employees.

“What is the future of risk management? Increasingly complex,” he continues.

“Global market dynamics continue, technological changes abound, environmental risk becomes evermore concerning and complex and new dimensions of societal risks are coming to the fore, resulting in a rapidly evolving risk management landscape. Risk and compliance functions have certainly become even more critical and complex. Most companies are reviewing their current and future state of risk and compliance blueprints. An example could be legal and reputation risks in using social media like blogs and Facebook and Twitter or the cross border legal risks present in international online shopping portals. “

Indwe Risk Services is backed by a legacy of enduring and trusted relationships, providing tailor-made solutions and treating its clients’ needs as its own.

So says Olyott.

The merger of Thebe Risk Services and Prestasi Brokers in 2006 gave rise to Indwe Risk Services. While Thebe Risk Services originated as Hoskens Insurance Brokers in 1903 and became the insurance arm of the Thebe Investment Corporation, the country’s oldest black empowered group, Prestasi Brokers was established in 1972 and became rapidly known for its innovative short-term insurance offerings for individuals and the SMME sector.

Indwe believes in personal relationships and offers face-to-face consultations. While constantly looking for ways to improve individual, corporate and commercial product solutions, the company is committed to providing excellent service to all its clients.

“We offer unique tailored cover and risk solutions,” Olyott says.

To learn more visit www.indwerisk.co.za.

The different types of risks

- Pure risks (insurance risks). This is when the status quo is maintained if the risk doesn't happen, or there is a loss when the risk does occur. Pure risks generally account for around a small percentage (say 10-15 percent) of the risks facing an organisation.
- Incidental risks. Examples of this kind of risk would be interest rates, foreign exchange rates and even rates of taxation. In a bank, for instance, these risks would be core.
- Fundamental risks. These risks are generally outside of the control of the organisation and tend to affect the economy as a whole. An example would be a recession, terrorism, rioting or war. These risks can also have both a positive and negative outcome, depending on the circumstances and the approach of the organisation.
- Speculative risks. These are generally regarded as the "profit and/or loss" risks, which businesses and their executives must take in order to grow and develop their businesses.

Image: Getty