Risk management in South Africa demands more than frameworks and forecasts. Risks are more pervasive today than ever before. The path to good decisions is rarely clear. How do we better understand risk and uncertainty to rebalance the odds?
Do you tap?
Your credit card, that is, not the dance. Do you know the basics of how a credit card transaction works? Do you understand the interaction between your card and the terminal? As Einstein pinpointed, if you cannot explain something simply, you do not understand it well enough. Given how rapid and easy tapping is, this may put you at greater risk of credit card fraud.
This is a small example of the complexity of our modern world. Risks and uncertainties lurk in plain sight.
Why Strategic Resilience Is the Foundation of Risk Management in South Africa
Why Strategic resilience is basic business
Risk has occupied the minds of businesspeople since the dawn of trading. In recent decades, business leaders have studied risk mainly through the lens of competitive threats. They have developed models and approaches to come out on top. Michael Porter’s 1979 Five Forces framework, recently updated to Six Forces, remains relevant today. Intel Corporation pioneer Andy Grove took competitive threats very seriously. Staying alert was his tenet. He believed someone would inevitably upend the industry.
“It’s your job as a leader to spot those times coming before they arrive, so you can respond before it’s too late,” he warned. His counter-strategy was simple: focus. Strive for supremacy at what Intel does best. “Outrun the competitors through the valley of death with focus.” It worked. Grove transformed Intel into the world’s leading manufacturer of semiconductor chips and microprocessors.
Focus builds craft, skill, dedication and mastery. It remains one of the best buffers against risk. But leaders must weigh it against the merits of diversifying. We call this covering our bases, or hedging our bets. “I give the talkies six months, no more. At the most, a year. Then they’re done,” said Charlie Chaplin in 1931. Talkies had been in theatres for five years by then. Chaplin still resisted the technology change until 1940. By that point, dozens of other actors and filmmakers had surpassed him.
Chaplin could at least see what he was up against. He could see what the risk looked and sounded like. Today, the bigger problem is different. Some issues we know about but do not understand. Others we do not know exist at all. That second category carries the greatest risk.
When Even Experts Cannot Predict What Comes Next
If this sounds complex, it is. Nassim Taleb is probably the foremost current analyst on matters of risk. His seminal 2007 book The Black Swan highlighted serious flaws in how we think about risk. One key watchout stands out. We overvalue highlighted facts, especially when experts present them. Taleb shows that experts predict no better than anyone else. They carry the same blind spots, the same inability to quell assumptions and the same conventional modes of thinking as everyone else.
If experts cannot reliably help us cope with risk, perhaps we should look inward instead. Our identities come with risks attached. Seventy years ago, political philosopher Frantz Fanon made a sharp observation about belief: “Sometimes people hold a core belief that is very strong. When they are presented with evidence that works against that belief, the new evidence cannot be accepted. It would create a feeling that is extremely uncomfortable, called cognitive dissonance. And because it is so important to protect the core belief, they will rationalise, ignore and even deny anything that doesn’t fit in with the core belief.”
Strong beliefs create blind spots. Blind spots create risk.
Hubris or humility? Ego or openness?
The more effort a person invests in forging a belief, the harder they find it to adjust. This carries huge implications for leaders and high performers in business.
Many leaders build their success on enormous effort, self-confidence and self-belief. Then a major disconnect arrives. Their decisions, their ways of working, their very business idea begin losing relevance. Like Charlie Chaplin, they refuse to acknowledge what stares them in the face.
Every leader must ask one question constantly: are we staying relevant? We must embrace the inevitability of change. We must stay alert to early warning signals.
Consider this moment from the television series Chef’s Table. The head chef of a three-Michelin star restaurant in Girona, Spain, tells his employers he plans to take an ice-cream making course. He is already the world’s best pastry chef. Does Jordi Roca not know enough? “It’s complicated [and] it’s important to understand you don’t know anything,” he responds.
Roca’s mindset captures the essence of understanding risk. Handling it, coping with its fallout, seizing its opportunity: all of this requires humility. It requires willingness to probe for different perspectives. It requires the courage to unlearn the things that brought success in the first place.
Humility is not weakness. It is one of the most powerful risk management tools a leader can develop.
Anything could happen next
Nothing in life or business is ever certain. Some risk must be taken. We cannot see around corners. But the greatest risk often lies in the blind spots within our own minds. Mitigating risk starts with being widely open-minded. It also requires maintaining self-belief while expanding self-knowledge.
The late Hans Rosling was one of the world’s leading statisticians, social researchers and critical thinkers. He was also a keen solo cross-country runner. In the foreword to his posthumous book How I Learned to Understand the World, his wife Agneta describes him as a possibilist. He always ran with a map and a compass. He wanted to know he could find the way.
That anecdote points to our best risk-mitigation approach for the twenty-first century. Prepare as well as possible. Then live with optimism.
At LRMG, we believe that the best organisations combine the right mindset with the right talent development and talent advisory infrastructure. In practice, this means building leaders who stay humble, remain relevant and navigate risk with both confidence and self-awareness. Risk management in South Africa demands exactly this combination. To find out how LRMG can help your organisation build the leadership capability and strategic resilience it needs, contact the team.
Sources:
- Basic and detailed Risk Classification models can be found online, for example in the Journal of Risk Research.
Frequently Asked Questions: Risk Management and Strategic Resilience in South Africa
What is the difference between risk and uncertainty in business?
Risk refers to situations where the possible outcomes are known and can be assigned a probability. Uncertainty refers to situations where the outcomes themselves are unknown. In practice, most business decisions involve a combination of both. As a result, effective risk management in South Africa requires both analytical tools and the kind of open, humble mindset that allows leaders to recognise what they do not yet know. Specifically, the biggest risks often come not from identified threats but from blind spots that existing beliefs and assumptions prevent leaders from seeing.
Why is strategic resilience important for South African business leaders?
South African business leaders operate in one of the world’s most complex risk environments. Specifically, they face economic volatility, energy instability, regulatory change, geopolitical uncertainty and rapid technological disruption simultaneously. As a result, strategic resilience is not a nice-to-have leadership quality. It is a commercial necessity. In practice, strategic resilience means maintaining focus on what the organisation does best while remaining alert to early warning signals that require adaptation, diversification or reinvention.
How does cognitive bias affect risk management decisions?
Cognitive bias causes leaders to overvalue information that confirms existing beliefs and discount information that challenges them. This is what philosopher Frantz Fanon described as cognitive dissonance. In practice, the more effort a leader has invested in building a particular belief or business approach, the harder it becomes to acknowledge when that approach is losing relevance. As a result, awareness of one’s own cognitive biases is one of the most underrated tools in any risk management strategy.
What leadership mindset best supports effective risk management?
The most effective risk management mindset combines wide open-mindedness with strong self-knowledge. In practice, this means staying humble enough to question assumptions, curious enough to keep learning and self-aware enough to recognise one’s own blind spots. As statistician Hans Rosling demonstrated, a possibilist worldview, one that embraces optimism while always carrying a map and a compass, provides both the confidence to act and the preparation to navigate whatever comes next.
How does LRMG help South African organisations build leadership capability for risk management?
LRMG helps South African organisations develop the leadership capability and organisational resilience needed to navigate risk and uncertainty effectively. In practice, this includes leadership development programmes, talent advisory engagements and capability building solutions that develop the mindset, skills and habits that sustain performance under pressure. As a result, LRMG clients build leadership teams that are not only technically competent but genuinely resilient. To find out more, contact the team through our contact page.
