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Every now and then things go wrong and when things go wrong they go wrong at the most inconvenient moment. Some examples of what happens in the office:
On a more serious note, disasters happen around the world with equipment and machinery that are made to perfection and are designed to withstand external forces, many times more than they would encounter in real life. Examples include the famous Titanic, the ocean liner that would not sink, Challenger which exploded just after take-off on its way to the international space centre, airplane crashes and the offshore drilling oil spill in the Gulf of Mexico a few years ago. Now, engineers are constantly developing mechanisms that will help preventing things that go wrong to turn into disaster. The airline industry is a good example, with all the back- up systems that airplanes are fitted with. Things will continue to go wrong though and not only with equipment and machineries but also in the social-economic-political arena’s of life and doing business. The recent global financial crisis speaks for itself. The way the financial institutions were designed and allowed to operate could one day go wrong and indeed it did.
The recent global financial crisis speaks for itself. The way the financial institutions were designed and allowed to operate could one day go wrong and indeed it did
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 into. 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 how 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, political developments, social structure, infrastructure, 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 don’t waste your time trying to. Instead try and 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 investors 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 happily go into our crisis management mode and we are 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.