When it comes to a business venture, the stakes are usually quite high. This is why disaster recovery is one of the most critical processes for the smooth functioning of the organization.
Whether a business venture is small or large, neither is completely safe against risks. This has come to light all the more in the face of disruptions due to the COVID-19 pandemic. This is what makes it important to look at the various aspects of “COVID-19 and Risk Management,” along with a brief understanding of supply chain risk management.
The novel coronavirus threat to businesses has come in the form of a never-seen-before threat. The biggest of them seems to be the threat of discontinuity due to multiple, concurrent impacts on businesses. This kind of risk leaves lesser options for recovery if not initially planned against.
This process of planning and strategizing beforehand to be able to recover quicker in the face of risks is what we call risk management. It can help combat interruptions to the normal functioning of an office as well as provide for a smoother restart.
A disaster or risk, such as COVID-19, has the potential of a direct impact on sales and profits. Besides, it can harm both customer and employee relationships with your business. Risk Management helps you minimize these losses because you have developed mitigation and recovery scenarios early on.
Some of the risk factors include a shortage of raw material or even disruptions in their supply due to transport-related issues. This was something that emerged as the strongest risk for many micro, small and medium enterprises due to the lockdowns announced by governments in the wake of the COVID-19 outbreak. Other risks include the breakdown of manufacturing plants due to natural disasters or accidents, strikes, or lack of communication within the supply chain.
Well-laid out risk management strategies can help avoid surging losses in the face of such disasters. Besides, you get in hand a ready scheme for rapid implementation of mitigation policies. COVID-19 and Risk Management have, therefore, emerged as one of the top priorities for businesses these days.
Before delving the details of “COVID-19 and Risk Management,” let us first look at the different possible risks in the face of the pandemic.
It refers to the disruption in the flow of cash into a business due to one reason or more. In the face of COVID-19, cash flow interruptions have become almost inevitable. The reasons are delayed customer payments, disruptive investment strategies and inadequate cash monitoring.
However, cash flow interruptions are almost always avoidable, even in the wake of the pandemic. Steps to divert it include, first, setting realistic targets for the near future to keep track of your finances. This cash flow forecast must have room for seasonal variations as well as potential cash flow problems in advance.
At the same time, taking control over both payment terms and stock management records can cushion businesses against impacts. Credit needs to be given due attention to, for staying on good terms with lenders can ensure the required boost to the enterprise when in need.
This is one risk that can have huge implications for a business. Frauds include deceits with a purpose of making either financial profits, particular actions or intentional misrepresentation of information and assets.
It was during the COVID-19 pandemic that even the biggest government organizations have reported cyber-attacks. These mainly include security and data attacks on businesses with the help of the internet. The attacker targets data resources or financial gains by gaining entry into confidential databases either through hacking or threats.
With structured problem-solving and a phased plan, you can easily mitigate the worst impacts of COVID-19 induced risks to your business. Here are the major steps.
The most effective way to start would be to study and analyze the different risks in the wake of the pandemic for your business. Threats due to the viral pandemic may have been causing disruptions directly or indirectly down the supply chain. This could be in the form of impacts on either raw material supply and transport, logistics, consumer sentiment or even regional disparities.
The wiser approach would be to assess each key component of the supply chain, such as plants, suppliers, warehouses, and logistics routes.
Subsequently, you can tabulate these risks and disruptions in a suitable register. Careful observation and documentation are a must. You can then jot down the present or probable impacts of these risks with the help of tables, concept diagrams and linkages. This also gives you a fair idea of the ‘one-case-multiple-effects’ scenario.
After you are done tabulating and assessing potential or present risks, the next step would be to understand and develop a mechanism for recovery. This depends on a few factors:
▪ Assessment of critical data systems and supply chain logistics
▪ Data and supply back-ups in place for the chain
▪ Comparisons between automatic or manual recovery plans
At the same time, you need to determine other factors that would go into the implementation of COVID-19 risk management. This includes determining possible interdependencies, downtime tolerance costs, limits and possible impacts of the risks.
To reconstitute means to re-establish the damaged parts of your venture/organization as the final step to “COVID-19 and Risk Management” Strategy.
This involves restoring of different functions and operations back to their original departments after they have recovered from the ill-impacts of COVID-19 related risks. This would entail inspection and monitoring of the capacity systems, repair and relocation work, ensuring connections and restoration to status quo and putting all contingencies to an end.
No successful implementation of COVID-19 Risk Management would be complete without a periodical review of supply chain risks. This helps determine an action plan to mitigate them in the near and distant future.
Mitigating Risks like the COVID-19 Pandemic
The COVID-19 pandemic can be comfortably described as an unknown risk, for it was something the world wasn’t prepared for since years on an end, Mitigation is the only way to deal with risks such as this. The following are a few steps you can follow.
Developing a risk-conscious culture: One of the best ways to develop immunity against unknown risks would be to develop a suitable and conscious culture against it within an organization. This will not just help in inducing quicker reactions but also lesser damage.
Transparency: Risk tolerance and downtime limits are two of the most crucial factors when it comes to risk assessment and management. Transparency in these aspects allows earlier detection of warning signs and hence faster responses.
Response to change: Above all, the response to a stimulus such as the COVID-19 is crucial for any business, big or small. Focus on empowering your workforce and take responsibility.
Disasters and risks to a business are inevitable, no matter how strictly you follow the rulebook. As long as a business exists, it continues to be surrounded by probable risks. The novel coronavirus pandemic has brought this to light like never before. Yet, careful risk management can always work as a parallel technology to fall back on. Timely synchronization of these efforts with your organization’s functioning can ensure the better approach and a faster recovery in the face of these risks.
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