Understanding Your Risk Tolerance: Balancing Risks & Opportunities in Your Global Portfolio
Written by Sweta Sinha
For instance, last week, our Supply Wisdom Alerts reported on the Gurdaspur terrorist incident in which several police officers were killed. A cautionary notice was issued to all of our Supply Wisdom clients with operations in surrounding areas within India to exercise extreme precautions, and Delhi has been put on high alert as a result of rumors of nine terrorists hiding in the city with explosives like RDX and detonators. With Indian Independence Day just around the corner and taking into account past occurrences, it is prescribed to bear caution, as the risk of another similar episode is highly likely.
Are terror-related incidences such as these risky enough to discontinue business in India? For most companies with a presence in India, the answer is no. There are a number of proactive measures that can be taken to prepare and mitigate any negative impact of such risks, including:
- Educating your employees who travel to high-risk locations to be vigilant, maintain a low profile, avoid using public transportation and crowded places.
- Investing in a sufficient security service to protect your offices in high-risk locations.
- Conducting workshops for panic management and incident recovery.
- Building disaster recovery and business continuity plans that address location-specific risks, including steps to relocate operations in case of service disruption.
- Testing your disaster recovery and business continuity plans regularly to identify and address any gaps ahead of a real-world event.
Successful global companies understand that the value proposition of any location is a tradeoff between its risks and opportunities. In order to gain access to positive attributes such as availability of the desired talent and competitive costs, the buyer must be willing to be subject to certain undesirable risks, in this case, the possibility of a terrorist attack (although this more broadly includes higher attrition rates, exposure to other geo-political risks and scalability concerns, to name a few).
Having a clear and comprehensive understanding of the risk climate in your global locations, and building an effective risk management program, is critical to the success of your global operations.