Personal Finance

Invest in reducing risks just as you look for best workers.

jkia fire

When JKIA caught fire two weeks ago, the biggest risk come from the least expected quarters or sections. Photo/FILE

Summary

  • Why should every businessman be unsettled by the JKIA fire? Thirty per cent of all companies that experience a catastrophic loss fail within the first two years, and another 29 per cent go down after that.
  • We are wired as humans to react and respond, not to prevent disasters. Successful business owners should work on ways to reduce risk.

Early on Wednesday two weeks back, a huge fire engulfed the JKIA arrivals section, destroying almost everything.

This incident saw the redirection of all flights to other major airports in Kisumu, Mombasa, Eldoret and Kampala. Initial speculations are that an electrical fault might have caused the fire.

Our reaction to the fire as a country left a lot to be desired. Passengers reported a slow response by the under-resourced fire brigade, and the blaze raged for four hours before being contained.

This despite the fact that JKIA is not only the busiest airport in East Africa, but because many of the responding units to Wednesday’s fire were from private security firms.

Why should every businessman be unsettled by the JKIA fire?

Thirty per cent of all companies that experience a catastrophic loss fail within the first two years, and another 29 per cent go down after that, according to John J. Brown, director of risk management, supply chain and technical development with The Coca-Cola Company.

The problem is most firms don’t do a very good job in this difficult area.

We are wired as humans to react and respond, not to prevent disasters. Business owners take risks in the form of capital investments, hiring personnel and investing in new products.

But in order to be a successful business owner, they should work on ways to reduce risk.

But what lessons, if any, can we learn from the JKIA disaster?

Roll with the punches

The first is that your biggest risks will come in forms and from places you least expect. The essence of good risk management is to roll with the punches, when confronted with the unexpected.

Individuals and businesses have only three choices when it comes to dealing with risk. The first is denial- not to acknowledge that risk exists and hope it goes away. In this idealised world, actions and consequences are logical and there are no unpleasant surprises.

The second is fear, take the opposite tack and allow the existence of risk to determine every aspect of behaviour.

Cowering behind the protection of insurance and risk hedges, you hope to be spared of its worst manifestations. Neither of these approaches puts you in any position to take advantage of risk.

But there is a third choice: accept the existence of risk, be realistic about both its odds and consequences, and map out the best way to deal with it. This, in my view, is the pathway to making risk an ally rather than an adversary.

Your risk is as good as your people

The second lesson is the fact that managing risk is a human endeavour and a risk management system is only as good as the people manning it.

The Daily Nation reported last month that Nairobi County doesn’t have a single working fire engine, and that three fire engines were auctioned off in 2009 because the county hadn’t paid a $1,000 (Sh87,000) repair bill.

The collapse of the fire department means responses to disasters is in the hands of private firms and the military.

Ultimately, good risk management is dependent on having the right people in the right places when crisis strikes. To succeed at risk management, you have to embed it in the organisation through its structure and culture.

Every organisation needs to appoint a skilled risk manager.

This highly placed individual, must understand all aspects of operations, from human resources to contracts, finance and data management.

Mr Waswa is the managing director of Outdoors Africa. Email: [email protected]