Managing risk and building resilience in an unpredictable world

In an increasingly competitive and unpredictable world, the ability of your business to respond to and adapt to unexpected shocks can mean the difference between its success, or failure. The Harvard Business Review describes business resilience as, “… the ability to recover well from setbacks, adapt well to change, and keep going in the face of adversity.”
 
No business is an island
 
Jean-Luc Johnstone, Advisory Manager at Moore Stephens Cape Town, says that the best way to build resilience into your business is to understand the risks your business faces and to mitigate for those risks, should they materialise. “You can’t anticipate and prepare for every risk, but if you have the right systems in place, you can manage any crisis better,” he says.
 
Although most small and medium businesses don’t have the capacity for a fully-fledged Enterprise Risk Management system, that doesn’t mean that they can’t still shield their businesses from risk. “It is crucial for small and medium-sized businesses to be alive to the world around them. We all know that no man is an island, but neither is your business,” says Jean-Luc. He says that owner-run businesses often make the mistake of thinking that the only thing that affects their businesses is who walks in and out of their shops, but the world has changed and they need to change with it.
 
Technology can make or break you
 
One of these changes is the omnipotence of technology. “Technology is a major driver behind many of the risks that face business today, but it can also be used to manage them,” he says. “Now more than ever, technology allows us to keep a closer eye on our business and keep up to date on what is happening in the world around us, but it must be an active decision,” says Johnstone.
 
The rise of social media means that even small businesses need to be more sensitive and attentive when it comes to their brands. “Your employees have the opportunity to post anything on social media and, with a single tweet, could do massive reputational damage to your company.”
 
“Sentiment is also a very powerful force, so much so that even though there is much information available, people react at a moment’s notice without doing any proper research. We saw that recently with Apple Inc. announcing its decision to replace Intel Corps processing chips in its Mac computers from 2020. Intel's share price dropped by as much as 9.2% after the news, a loss of approximately $20bn off its market cap, whereas revenue earned from chip sales to Apple only accounted for 5% or $3bn of Intel's revenue in 2017,” according to Bloomberg.  
 
With this in mind, Johnstone believes it is important to have a contingency plan in place, to work on your brand, and to anticipate the risks associated with social and other media if you want to bounce back quickly. “When you see a reputational crisis hit another company, ask yourself, “What if this were us? Do we have policies in place to deal with this? Do we have a communications plan in the event of a crisis?”
 
Be a team player
 
Another effective way to protect your business against unexpected shocks is to be an active member of the business community. “I always advise my clients to join industry groups and to be active participants in their sector. It’s a great way to find out how others are managing their risks so that you don’t miss anything. Don’t ever think, ‘that will never happen to me’, because if it can happen to them, it can happen to you”.
 
Cash is king
 
Technology may be the new kid on the block when it comes to thinking about risks to your business. However, Ryan Thompson, Director at Moore Stephens Pietermaritzburg, says that “cash remains king” when it comes to weathering unexpected shocks. “The key to a successful small and medium-sized business lies in its financial resilience, and this means you need to know your businesses through and through and have no blind spots.”
 
Don’t be afraid to ask for help
 
Thompson says that if there is any part of the business that an owner or manager is uncomfortable with or doesn’t feel like they fully understand, it is worthwhile bringing in an expert or specialist. He says: “In a small business, especially, you can’t be an expert on everything, but you still need to make sure that you understand all aspects of your business and know that everything is in order. If you don’t, you can suddenly find yourself in a difficult position without having seen it coming. This is often the case when it comes to compliance.”
 
The most successful small businesses always have an eye on their accounts – whatever comes in an out and no matter how small. In this way, they are able to plan ahead and anticipate financial difficulties, as well as be able to respond better to unexpected financial setbacks.
 

  • Contact Jean-Luc Johnstone, Advisory Manager at Moore Stephens Cape Town
  • Contact Ryan Thompson, Director at Moore Stephens Pietermaritzburg