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Managing risk involves identifying the risk and, perhaps more importantly, planning for how it can affect your business. Local and global experts have identified the year’s top business risks, advisers now need to consider how these could affect them and their businesses and manage these risks accordingly.
Risk #1. You are the victim of a cyberattack
A cyberattack can include ransomware, data theft and data leaks. A cyberattack could mean that your clients’ personal information is leaked (and used to commit fraud or other crimes) or that data and/or money is stolen. There is also the risk of your social media accounts and/or email being hacked or impersonated.
Cybersecurity concerns are a top risk according to the World Economic Forum (WEF) 2022 Global Risks report. Given the extent of the problem, advisers should consider consulting a cybersecurity expert, who should also help them develop a plan for the ‘in case scenario’ - if they are attacked, impersonated or data is breached.
It is also important to take note of Section 22 of the Protection of Personal Information Act which states that the regulator must be informed of a data breach as soon as it happens. If a client’s data has been breached, they must be advised of the details of the breach.
Risk #2. Your business is interrupted
The Allianz Risk Barometer 2022 lists business interruption as the second highest risk facing organisations in 2022.
In global responses to the survey, concerns that can lead to business interruptions include supply chain disruptions, natural disasters such as fire and conflict, climate change effects, and of course, interruptions due to pandemics and geopolitical tensions. South Africa has to contend with these, but also the high probability of business interruption due to a failure of infrastructure and possibly social unrest.
Advisers need to have an updated business continuity plan so they can carry on working if their business is interrupted. A business continuity plan outlines the risks, and details what will be done if the risk materialises. Your business continuity plan must also include a client crisis communication plan, for example details on when to contact clients and how, so they know what is happening and can still be serviced.
Situations to include in your business continuity plan include:
Back up plans if infrastructure services fail
Electricity and water supply interruptions and stoppages, natural disasters such as floods and fires. It may only be for a few hours but planning for these is a must.
Backup plans for unrest and riots
This will include a plan to secure your premises and data, you and any staff and visitors, and operate from a remote location.
Collaboration with industry bodies and fellow advisers
If you are unable to work you may need to ask another adviser or brokerage to step in and assist your clients. This may seem as easy as a phone call, but in practise will require a more formal plan to ensure that your colleagues are able to assist when called upon and that information is kept safe and confidential.
Risk #3. Economic stagnation has a negative impact on your business
The top concern of the South African respondents to the WEF survey was economic stagnation. Which can mean stagnant incomes (with a rising cost of living) and continued high unemployment. Budgets are tight across the board. This could have a huge impact on your business.
Managing lapses is critical and starts with identifying possible lapses. Advisers can monitor unpaid premium reports their service providers send and keep close to their clients so they can help them with their budgets when necessary.
Another way to assist with managing unnecessary lapses is to ensure that your clients make use of Debicheck. Debicheck is a debit order verification system where clients have to confirm and approve their new debit orders, electronically on a once-off basis at the start of their contract, before they are processed by their bank. Debicheck ensures clients are aware of the debit order, which means it is less likely to be declined. For more information on Debicheck, speak to a 1Life business consultant.
Diversifying your income will give your business a cushion and back up for falling incomes in one area of your business. Identify new clients, from different markets to your existing clients, and new potential areas of revenue from different products. Advisers can also consider partnering with allied service providers such as lawyers and accountants to increase their client base and service offerings.
Also keep a note of debt: If incomes stagnate, debt may rise, making budgets even tighter. The IMF Country Report for South Africa notes that South Africa’s household debt is “somewhat elevated relative to peer countries”, and should be monitored.
Managing risk
It is impossible to identify every single risk, but it is possible to think about what could affect your way of working with your clients and build some plans to deal with possible scenarios. Advisers should think about the following when analysing possible risks to their businesses:
Make it personal: The key with risk is to identify what could affect your business and your clients and prevent you from working, earning, and achieving your goals. Everyone might be talking about climate change, but you need to ask: How could this affect me?
Build trust with your colleagues and clients: This is critical. When you have a trusted relationship, your clients will stand by you as you manage risks, which will not only help your business but also your reputation. Colleagues and advisers will also stand by you and offer assistance and support.
Have a plan: A must have is a business continuity plan, that is updated regularly (at least once a year and when a new risk appears).
Plan for what you know
Risk is about the great unknown, and even risk experts and futurists have been caught out by an unexpected risk, or a risk having a greater than expected impact. This is a feature of the world we live in. To build resilient businesses we have to think about what could affect us and how, and plan for these possibilities. These plans help us when the ‘expected’ risk arises and can be adapted when an unexpected risk arises.
