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Mitigating business risks
2006-06-28 08:50:14
By Mireny John
Quite a lot of of the gullible minds might have questioned why Tanga Cement management recently opted to import coal from South Africa as an alternative source of fuel.
For the cement factory to choose another energy source is not news, given the ongoing power shortage and load shedding, on top of its exorbitant price.
What looks like an intriguing management decision is why couldn’t Tanga Cement procure the same from domestic suppliers, say from Kiwira colliery in Mbeya region?
The whole game is centred on reducing business risks. The coal mining technology deployed at Kiwira is not efficient enough to ensure that the size of coal particles burn out to ensure maximum release of energy. In addition, supplies are not as rich as to meet factory’s daily demand.
Transportation of coal to the factory site is yet another powerful headache, due to the dilapidating railway system and lack of sufficient wagons for ferrying the coal.
For Tanga Cement to go all the way to South Africa to look for coal supplies, it is part of its strategy to mitigate internal business risks.
This example showcases a situation whereby a top-of-the range technology, efficient infrastructure and reliable power supplies are critical elements in toning down unforeseen threats to business.
Last year, the World Bank rated sub-Sahara Africa as the most difficult place to do business. One of the overriding risk is the unpredictability of events due to our unstable investment climates.
Some things like lack of poor sanitation and access to clean water might unfortunately be deemed trivial to an economic hub like Dar es Salaam.
Yet their deficiency can be proved to be incurring considerable costs, as on-site medical and water purification facilities need to be installed.
Poor literacy is also considered a risk to emerging businesses. A recent South African study shows that a nation’s literacy rate is strongly linked to their ability to sustain economic development.
For business success, good governance is never a mere idiom. A lack of political transparency is considered one of the greatest risks of doing business in Africa, as it engenders corruption and precariousness.
Until recently, a lack of communication facilities hampered business progress; but recent aggressive private sector’s investments in telecommunication have tremendously facilitated easier connections.
As communication channels improve, organizations are finding it easier to access information about opportunities and developments, both domestically and globally.
The rate of crime and disease likewise affect risk factors to business. Where prevalence of malaria and HIV/AIDS has reached pandemic dimensions, the sustainability of workforce efficiency becomes shaky.
Corporate Social Responsibility (CSR) similarly influences the threat to business success.
When a company invests in routine in-house training, the long-term objective is to achieve a pick up in measurable labour productivity.
Experienced managers would tell how scientifically managed CSR-programs become integral managerial tools for effective corporate manpower development strategies.
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