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While working on this article, the electricity went off, the same way it has been going off almost every evening this week. While the nation rallies behind the plans to build the millennium dam and we look forward to a time that all power generation plants, including those under construction, will deliver regular power supply, we continue to experience unexpected power cuts as the existing grid is not capable of carrying the load. Whatever the causes of the power cuts may be, the situation may not improve until the power lines and old transformers have been replaced and the projects mentioned above have been completed so that the country will indeed be in a position to export electricity. Until then however, it seems we will have to live with regular disruptions of power supply.
While this situation is rather inconvenient at household level, for businesses this reality is a liability and a threat. Sudden interruption of production results in losses and damages and production goes down. As a consequence production costs increase, especially as many businesses resort to generate electricity by means of a standby generator, incurring additional investment expenses and running costs. Business owners who cannot afford such solutions are left with an actual loss in production time, which increases costs as well. In short, irregular interruptions cause unnecessary problems and damage.
Which brings me to the issue of making a risk analysis and the need to continuously scan the environment and market of the particular business that investors – domestic and foreign – are involved in. It is critical before deciding to invest and also after the investment is made and the business is operating to continuously scan the environment for opportunities and for threats that may come in the way of the business. While identifying potential risks, the next step will then be to think of ways to respond to the situation in a proactive manner, in other words have a plan “B”. A proper risk analysis and market scan will help in making initial investment decisions (“Will I enter this market or not?”) and will help in making contingency plans which can be implemented when the need arises. Waiting and seeing while sucking our teeth will not be a very effective way of dealing with certain situations.
Issues that require continuous scanning include economic developments and trends (think of the consequences of the recent global financial crisis), political developments, social structure, infrastructure (electricity and water supply for example), growth trends for your products, cultural acceptance of your products, market data, market size, tariffs, existing and potential competition, sales projection, production costs and potential profits.
While making a risk analysis and market scan it is important to consider external factors like the ones mentioned above and ask yourself, whether you have any influence over them. If you have an influence over a factor, it means there is something you can do about it. If you don’t have an influence over it, there is nothing you can do about it so you better not waste your time trying to. Instead find out how to deal with it or think of ways in which you may be able to extend your influence over that particular factor. And if there is not much you can do about a certain issue by yourself, joining forces with those who find themselves in the same position may help. That is why it is important to have trade unions for example or owners’ associations, as members of a particular important market sector may be able to lobby for their common interests.
Now, scanning markets and analysing risks is not about being pessimistic or negative. It is about being realistic, about being informed and about being prepared. It is about having contingency plans in case things work out differently than initially expected. It is about having a “Plan B” in place. I know it is in our nature in Ethiopia to wait and see what will happen tomorrow, sleep over it, and to respond to situations as they arise. Once a crisis is beginning to unfold we go into our crisis management mode and we are very good in crisis management in this country. Being prepared, knowing what and what not to do and dealing with developments in a proactive manner before they turn into a crisis will be more effective though.
Irregular power interruptions are a reality and it seems that may will continue to come our way in the near future. Better prepare for it now and be ready to continue production, not if but when it when it happens.