Management News

Building Resilience

I am a preferred flyer with Emirates and choose the airline for all my flights to the US and select parts of Europe. March 22, 2017, the UK and US governments imposed a ban on passengers carrying laptops in the cabin from six airports around the world. Dubai is one of them. This is an external risk. I will now fly through a ‘US and UK friendly’ airport. However, Emirates will be directly impacted. They have deployed their best assets on those sectors. If Emirates has not factored this risk, given its business model they will find it difficult to mitigate it. The impact will touch every bit of Emirates—financials, brand image, fleet management, customer loyalty programmes, employees, investors, and many more. This development is a clear indicator of how risk has changed in the last two decades and the speed of its change in the last five years.
The ‘risk mix’ is changing at a pace of knots. ‘Risk mutation’ like virus mutation is the new phenomenon that is developing. Most conventional risks have now become ‘hygiene’ checks for businesses. Companies are redrawing their risk management plans and reviewing it at a higher frequency. It is not being managed in operational silos anymore. Risk management is a high weightage item on the boards’ agenda. It sometimes matters a lot more than growth plans. This is primarily because the danger may be in the blind spots caused by the lack of an integrated view of operational activities or in areas not considered to be at risk. The Emirates example is a case in point.
A comprehensive, dynamic, and integrated approach to addressing corporate risk is essential in identifying critical strategic and operational risks that affect enterprise value. This will involve a holistic view of strategic, financial, operational, and external risks. These are the conventional parameters. Additionally, the new and the more compelling pointers of risks that have found their way into the new framework are the tirade against globalization— popularly known as the anti-globalization movement, changing international trade dynamics—future of select trade agreements around the world, data piracy, financial crises, environmental disasters, regulatory changes, and obsolescence in product or service caused due to disruption or innovation in conventional businesses. Risks have an upside and a downside. Both extremes cannot be ignored as they have a direct bearing on the future value as well as net present value of a corporation..... Page 17