Risk, resilience, and recovery

LAHORE: Desired improvement in public institutions is not in sight in the short term. The private sector needs to develop flexibility, acumen, and special skills to buffer themselves from current confusion and risks.

Mental health of the human resource in covid-19 atmosphere is the greatest challenge that entrepreneurs need to address through a prudent and humane strategy. Pakistan is not alone in this regard. The human resource in economies, hit harder by the Covid-19 virus, is more disturbed. In developed economies, the governments are operating in tandem with the private sector to cope with psychological scars left by the virus.

Pakistan is lucky in the sense that Covid-19 did not hit its population as severely as in other countries. Moreover in view of prevailing poverty the workers are keen to be more productive to earn more.

They do fear getting infected but they have no choice but to work. Only the entrepreneurs could boost their confidence by adopting all SOPs and providing them with a clean and healthy working environment (the working conditions pre-Covid-19 were pathetic in many enterprises). The physically weakened and fearful workers would not be able to perform well in suffocating factory floors.

Post-Covid-19 era offers more opportunities to Pakistan. The private sector must develop special skills, flexibility and acumen in order to gather terrific advantages that would buffer them from current confusion and the impact of risks. The local entrepreneurs know the problems they face in wake of bad governance in state institutions. They must also realise that governance within their enterprises is also needed to move ahead. They should adopt best practices by applying physical, mental, and strategic checks. This way they could increase their efficiency and productivity to compensate for the loss suffered because of corrupt state practices.

The margins warned are sharp and any slippage may doom companies to failure or underperformance. Only strict internal checks in private enterprises would shield them from inefficient ways governments operate in Pakistan.

The risks to an enterprise are interconnected which include supply of capital, disruption of markets, and volatility of values. Given that banks are posing problems for most of the manufacturers in addressing the credit market and operations; the companies must go back to the drawing board to identify, assess, and manage structural risks.

It is important that organisations are cognisant of where it hurts. Ideally, they should also be aware of their major clients, suppliers and operations of banks all at the same time. Threats and opportunities come from many different sides. Prudent actions could prevent many disasters and reduce risks to the enterprise.

Assessing risks is crucial to have a better understanding of them. The role of the assessment is to grow awareness. The best risks to manage are those that create more downside than upside. Finally, the structuring of risks consists of recognizing different risk exposures in the network of relationships of a business (investors, clients, suppliers) and agreeing to share risks with those least sensitive to them in order to create value for all.

Right attitude of the senior management in a volatile economic climate is absolutely essential. Instead of blaming the game for failures an honest reality check on the competence should be undertaken by the senior management to find out what changes required were made in time. The senior management may have to take some painful decisions of liquidating high-valued stocks of the recent past at current values to keep the wheels running instead of waiting for the values to increase and risk the closure of the manufacturing facility.

Prudence demands that as major shifts happen both locally and globally, strategies need to be revisited. While strategic thinking is complex, and the building of strategies requires much work, there are ways to test the pertinence of overall strategic choices.

Smart moves will leverage the company’s distinctiveness, objectives, values, culture, capabilities in terms of skills and resources, assets, clients, and partners. These moves would ensure that enterprise does not fall into psychological traps related to overconfidence; and address significant market opportunities.

Quality leadership, aligning all towards the newly defined goal, will consistently drive towards success. But, of course, mistakes can also be made at leadership level, which leads us to governance risks.

Even where the selection process is high, good leaders in some circumstances may turn out to be ineffective. The problem comes when a failing leader lasts for too long. In order to control that risk, governance rules need to apply, not to constrain but simply to make sure that if leadership failure occurs, it does not become too costly to the organisation. Once all governance checks are in place the possibility of success of a company is enhanced even in tough times.