The COVID-19 global pandemic has hurt numerous sectors worldwide, and Kenya’s pension industry has not been an exception. As the crisis continues to evolve, organizations worldwide are struggling with the multi-dimensional set of risks it has unleashed. While the safety and well-being of workers affected by COVID-19 remains a primary priority, companies have also been forced to triage other essentials, such as; optimizing risk management to ensure organizational resilience in the course of the crisis; leveraging the implementation of Business Continuity Plans (BCPs) to counter the current disruption and redefining the role of risk professionals – to fortify organizations against similar future occurrences.
The COVID-19 crisis has significantly affected financial markets, and market risk remains one of the heavily impacted areas. Stock markets have declined sharply, and volatility has increased. Treasury bond yields have reached record lows, and credit-default-swap indices have been surging, reflecting concerns of increased corporate defaults. For many assets and liabilities, fair values may have changed significantly, reflecting changes in cash flow forecasts, greater uncertainty and elevated risks. Concerning pension and retirement savings, the COVID-19 crisis has set the stage for a retirement crisis in Kenya. The pandemic continues to portend bad times for the retirement sector in the next couple of years since most Kenyans are now hard-pressed to meet daily upkeep expenses.
As a key player in Kenya’s Pension sector, the CPF Group put in place a robust enterprise risk management framework that incorporates a Business Continuity Management System (BCMS). The BCMS is managed by a Crisis Management Committee (CMC) that has been proactive in mitigating the current pandemic. Several actions were taken once the risk level for the pandemic was heightened by the risk function, including holding weekly CMC meetings; Lockdown testing drills; Equipping staff to work remotely; Revision of essential staff list and reduction in office premises attendance; and Revision of budgets as a cost-containment measure, among others.
By the time the pandemic had hit a fever pitch, the CPF Group was resilient enough to manage without the need for a radical scale-down of its staff or operational components. It is important to mention that the BCMS was regularly tested over the years to keep it functional in the event of an actual incidence, and the Covid-19 pandemic unexpectedly presented that incidence.
As the old adage goes, ‘No Man is an island.’ It is during crisis times that like minds should come together. Case in point, the leaders of risk in the financial services within Kenya usually congregate using a WhatsApp forum and regular webinars designed to share ideas on how to manage the current pandemic. This group was an eye-opener as leaders brainstormed various pertinent issues that were implemented successfully in different organizations. From quick policy templates to COVID-19 protocols, isolation strategies, mass testing proposals, Board paper issuance, lockdown planning – you name it, all these were discussed with fresh ideas always being brought up. Therefore, professionals should connect and brainstorm over current problems affecting the industry because, in sharing, organizations can build their resilience better.
Business Continuity Plans (BCPs) were design for shorter-term disruptions, and as such, most practitioners have been forced to go back to the drawing board to relook at their BCPs in light of COVID-19. Having said that, companies with BCPs were better prepared and focused to deal with COVD-19 than those without. As you may be aware, most companies have either massively downsized or closed shop altogether. BCP’s enable Organizations to better plan for the unforeseeable future with its volatility. These enablers could include documented steps to be taken in the event of a disruption, setting up a capital reserve that can cushion an organization during dark days, succession planning, among other measures. BCPs should not just be neat policies to show off to stakeholders on-demand, they should be regularly and rigorously tested year in and year out to establish their efficacy. The acceptance of the BCP by the top leadership of an organization ensures its adequate resourcing and increases its probability of success.
Moving forward, it is unlikely that we shall see things the same way again from normal working routines, working hours, physical offices, travel, performance management and even risk management. In fact, I foresee a future where employee contracts will be output-based instead of being based on a retainer salary. In line with this, employees will have much more flexibility to work diversely, including offering their skills to multiple organizations at the same time. More and more people are likely to move from the hustle and bustle of city life to more serene environments that are also affordable, less stressful and healthier. The Education system is also likely to change radically to suit the market demands of people who need to think outside the box. Schools are also likely to explore homeschooling and move beyond traditional geographical boundaries. Any organization that does not adapt will definitely ‘die.’
This has been a critical season for the Risk Profession as Organizations looked to them to help steer and navigate through the tide of COVID-19. Risk leaders are expected to be proactive in enabling their organizations to identify future uncertainty risks, such as the current one. Proactivity will translate to scenario-building, benchmarking with other events in the world, and regular testing of continuity assumptions and plans to prove their functionality.
Additionally, risk leaders shall be expected to remain key advisors to their Boards and Senior Management teams. Advisory needs to remain independent, objective and well informed. This means that risk leaders need to keep abreast of the most current information and public policy changes. Moreover, risk leaders are also expected to raise red flags on anything that could go wrong so that it can be nipped at the bud on time. The survival of most organizations may actually rest on the role of risk leaders during this volatile season.
Sospeter Thiga is a Risk Management practitioner and is currently the CPF Group Head of Risk and Compliance.
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