A prudent time for a corporate political risk assessment

Institute of Risk Management South Africa (IRMSA)

Increasing internal conflict within the ruling African National Congress in an important election year as well as broader societal unease has raised a vital
debate on how companies should identify and respond to political risk.

While the issue has always been on the country’s strategic risk radar, seemingly more pronounced party factional battles, now spilling into the public discourse
are a cause for concern. Companies, says the Institute of Risk Management (IRMSA) should be aware of this new environment and develop an understanding not only of broader implications but also the potential threats and opportunities it poses for leadership, staff and customers.

Says IRMSA Chief Risk Advisor Christopher Palm, “We live in a robust democratic country where political interrogation and contestation are part and parcel of our daily lives. But as the country still fights the scourge of the COVID-19 pandemic and plans for a possible dangerous third wave, citizens are now looking for certainty and stability from political leaders. If the current trajectory of rhetoric continues, we have concerns that this environment which is critical to growth, development and service delivery could become compromised.”

“A better understanding of political risk can also be beneficial to a company in terms of recalibrating its existing strategies and business plan.”

To that end, IRMSA recommends that risk officers should be developing a keener understanding of the current political climate, engaging with experts in the
field and presenting regular and well-informed updates to the C-suite. IRMSA says there should also be greater engagement with staff over their concerns.” Says Palm,
“The best understanding of any political environment often comes from the lived-reality of people who work in organisations.

Managers should make time to listen to their concerns and develop strategies to assist employees who for instance might find themselves unable to get to work or
who have perhaps been threatened with intimidation. Their real-time feedback is also useful in compiling a continuing composite picture of the micro-environment in which a company operates.”

A better understanding of political risk says IRMSA can also be beneficial to a company in terms of recalibrating its existing strategies and business plan. “While companies do not like uncertainty, choppy waters can also refocus their thinking in terms of its service offering, if changes can be made, or whether new revenue streams can be developed.

South African organisations are recognised the world over for being adept and nimble when it comes to making these changes,” notes Palm. IRMSA says
dealing positively and responsibly with political risk should not scare a company but should rather be seen as a responsible and prudent leadership practice.
IRMSA suggests that companies develop a political risk management dashboard that looks in political terms at the organisation’s current strategic and operating
environments; primary and secondary sectoral threats; and then potential impact on the organisation.

Once that is accomplished, says IRMSA it becomes much easier to develop both risk response and communication strategies should the need arise. IRMSA also suggests that organisations re-look at their existing political risk
insurance cover.

As part of its ongoing advisory service, IRMSA has a range of qualified experts who can help companies conduct and implement a political risk assessment.