Globally, economies are facing a number of complex challenges, from geopolitical tensions to ever evolving technological threats. Today, the risk environment has become significantly more interconnected.
With the increasing complexity of an organisation’s operational environment, operational failures can arise unexpectedly with consequences that can ultimately cause business interruption. Prudent businesses in Mena can focus on growth by constantly observing their operational environment for risks that arise, and ensuring they have protection against them.
To achieve this, organisations should reflect on how to strategically mitigate against four of the top operational threats in the region: supply chain issues, geopolitical environment, climate inactions, and technology.
The supply side
Companies today do not operate in isolation, they are part of complex networks with intricate supply ecosystems, all critical to optimal business operation. Along with the rising costs of warehousing, this makes issues with the supply chain one of the top threats facing businesses.
The geopolitical environment also plays a significant role in creating unforeseen operational uncertainties and unexpected failures. Unlike the inevitable risks arising from the uncertainty of the geopolitical landscape, risks arising from inaction against climate change are avoidable — yet they pose a number of operational threats in the region.
As countries take steps to reduce their dependence on fossil fuels, those in the Mena region are diversifying their economies to become less dependent on oil and more market-led. Although technology is revolutionising business operations, data breaches, cyber extortion, and notification costs are a few of the many unfortunate consequences of growing cyber threats within Mena.
Urgent action must be taken because technological risks can inflict critical damage that disrupts the smooth operation of businesses in almost all industries.
Global risks spill over
The dynamic business landscape of the Mena region is shaped by what happens at a local level, but is also deeply influenced by the global risk environment. With cyber-attacks and fiscal crises top of mind for business executives globally in 2019, according to the World Economic Forum, the question is how do businesses protect themselves against operational risks for future growth?
* Improving operational efficiency
By continuously striving to reduce costs with no reduction in quality, businesses can improve efficiency. Sensible practices such as supply chain optimisation and enhanced data management guarantee low operating costs, so the impact of an unexpected operational risk will be lessened.
* Smart hiring
Having employees who follow good protocols leads to reduced system/process breakdowns and in turn fewer operational errors.
* Action plans
Planning ahead can save your business from serious operational failures. By identifying potential operational risks and preparing an action plan that you can follow will enable you to minimise damage. Experienced insurance brokers will provide an organisation with a holistic view of the operational risks facing their business’s daily operations.
The independence of an insurance broker enables them to leverage both global and local relationships with trusted insurers and find the best value, client-centric solutions for the business needs, personalised to their own operational environment.
* Mindset shift
Organisations should perceive operational risk as an opportunity to become better at taking more calculated risks, a chance to improve operational efficiency and in turn encourage business growth, instead of just a way to avoid risk. Risk consultants provide expert industry knowledge and have tailored solutions, specially created to mitigate against your industry’s unique risk landscape.
Both insurance brokers and risk consultants can provide support to businesses to increase their efficiency.
Ultimately, businesses should be mitigating against the risk of business interruption as a consequence of operational failures, which can cause serious liquidity issues, potentially harming a business’ reputation and affecting its bottom-line. Business interruption insurance is growing in importance as the loss of critical business functions can impact a company’s operational, financial and corporate standing.
Specifically-designed insurance coverage compensates companies in the case of business interruption to prevent operational failure and financial loss.
Although many operational risks are beyond our control, we can choose how to react to them. Organisation resilience is in part determined by a company’s ability to respond quickly to threats that are critical to business success. Businesses should ensure they are empowered to mitigate and transfer against these risks to achieve a level of peace of mind that allows them to focus on growth.
Alaaddin K. Mukhalalaty is Regional Corporate and Sales Leader — Mena at Marsh