Businesses must innovate to be sustainable in changing world

Businesses need to do more to build resilience for the future and to adapt to a fast-changing world if they are to remain sustainable. That was the verdict of a panel of speakers at the recent Risk Frontiers East Africa seminar, organised by Commercial Risk Africa. Looking at sustainability and resilience in the light of climate change, Joyce Ngare, head of risk at Genghis Capital, warned: “Climate change is live with us,” saying that businesses have to adapt fast to cope with the potential consequences. Evance Mugah Rabong’o, agriculture underwriter at Continental Re, agreed, adding: “A lot is being done and a lot more needs to be done in terms of innovation.” Ms Ngare suggested: “When you talk of resilience, it is about how you take up shocks and stresses. I liken it to your immune system. If you think about sustainability for your body, you go to the gym to prepare your body for shocks.” She added: “Resilience and sustainability go hand in hand, together with risk management – and risk management is a good place to start when discussing the resilience of your business and its sustainability. Ask yourself: how can the business withstand the shocks and stresses or the environment around it? And how can I prepare it for those events?” Looking at agriculture – a crucial sector for the Kenyan economy, Mr Mugah Rabong’o pointed out: “Agriculture accounts for a third of GPD and employs more than 70% of the working population [in Africa], but [the continent] lags behind in terms of technology and is dependent on rainfall for successful harvests.” He said that, because of climate change, there are changes – such as drought and excessive rainfall. He highlighted the peril of drought in particular, which accounts for about 40% of the risks Kenyan farmers face, also explaining how wide the impact can be beyond the farmer into the wider community, ultimately causing a food security risk for the entire country. Insurance is one solution, he suggested, but still has challenges in accessing farmers and providing the right products. However, Emeka Akwiwu, property and casualty regional manager at Gen Re, suggested insurance cannot be the only solution. “If you think about it, if the farmer keeps claiming on his insurance, he will have the money, but we will all suffer because there are still no crops to feed us or our workforce. We will find no one comes to work any more because they don’t have the necessary food to live on.” Mr Akwiwu said the traditional definition of resilience is the ability to bounce back from a shock and how quickly you can bounce back. But he suggested: “Resilience is not just a business or individual issue; it is also a question of national security.” He called on businesses to work with government more closely to address the national risk list. Insurers, he said, should be working with government to help prevent shocks from occurring, rather than simply being on hand to make payouts. “Why not put processes in place to make sure things don’t happen in the first place?” he asked. “The best insurance you can buy is the insurance you never have to use. If you prevent the shock it is better – there is no disruption.” Mr Akwiwu said this argument applies to resilience too. Instead of simply preparing for a shock and how the business might cope, he suggested risk managers take it one step further and look at what more can be done to stop that event happening in the first place. He used the example of multinational photography and imaging company Fuji. “From the start, it didn’t just focus on film, but also other things like chemicals, pharmaceuticals and make-up. Kodak, on the other hand, purely focused on film – and it was completely disrupted by technology. Now the price of a Fuji share is just under $43, while Kodak is just under $3. Kodak used to be the market leader and now they are struggling to stay in the race.” Like Ms Ngare, he likened resilience and sustainability to the human immune system and suggested a series of tips to improve the resilience of any business: Redundancy – have the capacity in a number of areas so if one area is disrupted, the business can thrive Constantly learning – if attacked by one flu, your body learns to recognise the bug; similarly, businesses should learn from previous experiences Businesses tend to focus on KPIs, but businesses also need to consider how to adapt to the environment – what is a threat and what can be done? Mr Akwiwu pointed to businesses that actively go out and acquire disruptors in their nascent stages. “When you see a trend, go out and look to buy whoever has that technology at the infant stage, when it is affordable. Partner with them, work with them, learn from them. You should not fear changing to add longevity to your business,” he suggested. “It is safer for you to disrupt your business than for an external force to disrupt your business.” He concluded: “How can we mould and shape a way to deal with the risk and to prevent the risk happening in the first place?”

Businesses must innovate to be sustainable in changing world

Want to read this article?

Read Next

German SMEs record rise in cyberattacks, reveals HDI poll

Munich Re reorganises P&C underwriting in Asia Pacific, Middle East & Africa

Climate change to cause ‘massive economic damage’

European bosses say half of supply chain will not comply with CSDDD

Risk management community mourns the death of former Ferma president Jorge Luzzi

German SMEs record rise in cyberattacks, reveals HDI poll

Munich Re reorganises P&C underwriting in Asia Pacific, Middle East & Africa

Climate change to cause ‘massive economic damage’

European bosses say half of supply chain will not comply with CSDDD

Risk management community mourns the death of former Ferma president Jorge Luzzi

Want to read this article?

Read Next

German SMEs record rise in cyberattacks, reveals HDI poll

Munich Re reorganises P&C underwriting in Asia Pacific, Middle East & Africa

Climate change to cause ‘massive economic damage’

European bosses say half of supply chain will not comply with CSDDD

Risk management community mourns the death of former Ferma president Jorge Luzzi

Related Articles