Following the pandemic, industries across the globe spanning various sectors have seen a profound change as market demands have shifted and businesses have strategised to adapt. As the pandemic has made bare the inherent vulnerabilities that lie in certain business models, it has become crystal clear that there needs to be a new way of thinking about risk management for business resilience and sustainability.
In this article, we will look at the effects of COVID-19 on risk management. We explore the changing market conditions and how we are rethinking risk management as a result of the pandemic. Learn more about how data insights can empower businesses in developing risk management frameworks that are ready for adverse conditions.
Changing Market Conditions Due To Covid-19
As economies around the globe grappled with the sudden change in consumer behaviour, supply chain disruptions, and travel restrictions brought about by the pandemic, we have seen a dramatic shift that has redefined industries and sparked innovative responses which still have an effect today. Here are some ways that businesses have been permanently changed by the pandemic.
1. Shifts in consumer behaviour
While online shopping had already been on the rise, the pandemic was the catalyst for its dominance over the market, highlighting its ability to meet three key consumer demands: convenience, round-the-clock availability, and variety. Since then, we have seen retail giants swiftly pivoting to compete on online platforms, diversifying their revenue streams while offering their customers convenience. Online shopping appears to be an enduring trend that highlights how quickly altered consumer habits can have an impact on entire industries.
2. Digital transformation across all industries
With travel limitations and the need for social distancing, many industries have harnessed technology to work around these restrictions. For many businesses, this led to discovering how seamlessly digitalisation could enable remote operations, enhance customer engagement, and streamline supply chains. A number of industries have even found innovative new products such as telehealth services and virtual events which still have an undeniable place in the market today.
3. Supply chain risk awareness
In traditional supply chains, single-sourcing and just-in-time inventory management systems made procurement easy to manage and incurred lower storage costs. The overreliance on these posed a major problem for companies as the global supply chain saw major disruptions, casting a spotlight on its inherent risks.
As businesses found ways to continue operations, they began to diversify suppliers and explored local sources - these still prove to be excellent avenues for risk mitigation today. The supply chain disruptions posed by the pandemic had been a much-needed wake-up call for the need for risk mitigation in the supply chain, looking into flexibility and resilience just as much as cost and reliability are taken into consideration.
4. Environmental consciousness
Early on in the pandemic, many industrial cities saw their skies clear and pollution levels drop for the first time in years. This brought about mainstream discussions about sustainability and companies faced pressure to realign towards being environmentally conscious. For some companies, this served as a great timing to transform their operations to become greener and it is a practice that will pay off in the long run as the awareness grows and regulations change.
5. Putting a spotlight on business resilience
The one factor that had set the companies that thrived apart from the rest is its resilience. And this goes beyond minute details about its specific industries and markets - it is evident that the companies that were able to remain flexible and swiftly adapt to changing conditions were the ones that fared best. Part of this boils down to an inherent ability to respond as an organisation to unprecedented circumstances, as well as the ability to embrace change and remain agile in their operations.
The pandemic has shown the extremes in the dynamism of market conditions. It has had a profound impact on most, if not all industries, with lasting effects today. What we have seen in some cases is that innovation has led to new concepts that have carved a niche for itself in the market. In others, it has highlighted the vulnerabilities that are present in certain supply chains and the need for organisations to remain resilient and flexible.
Rethinking Risk Management Strategies Post-Pandemic
The pandemic exposed inherent vulnerabilities that lie in certain business models and revealed where its risk management frameworks have fallen short. As we have seen, the companies that did thrive were those that demonstrated great agility and were swift to respond. This has been the flashpoint for the shift in how we think about risk management as organisations began to see the value of adopting holistic systems that integrated data insights and specialised risk management tools alongside risk-aware changes within the company itself.
One of the most glaring lessons from the pandemic is that market conditions cannot be taken for granted and that risk can evolve in the blink of an eye. As far as risk can be reasonably foreseen, it can be mitigated. However, with unprecedented circumstances, many companies were left unprepared without a contingency plan in place for the worst-case scenario, as we discussed in this article here.
Besides, those that did have a risk management framework during the pandemic also saw that conventional risk assessment and scoring methodologies were flawed and unable to make predictions as accurately as they used to. Predictive models that functioned on certain assumptions about the market were unable to keep up with how rapidly things evolved at the time, exposing its limitations.
On that note, the pandemic illustrated how real-time data and continuous risk monitoring had given an edge, especially in uncertain times. Traditional periodic assessments, while valuable, offer snapshots of a business's risk exposure at specific moments. Yet, in the face of swiftly emerging risks, these snapshots fell short. As risks evolved unpredictably, organizations clamoured for more adaptive solutions.
By fusing its deep expertise in risk management with data analytics and technology, risk management platforms such as iCON by Coface emerged as the beacon of hope in these tumultuous times. By offering real-time insights and enabling continuous risk monitoring, it empowers organisations to stay ahead of emerging risks, giving them an edge over their competition.
iCON provides organisations with a panoramic view of their risk profile, as well as wider trends in their industry and globally to enable proactive decision-making. Its data insights are backed by Coface’s 75 years of experience in economy, credit insurance, and risk management.
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