Let’s not confuse risks management with crisis management…

From Belgrade to Northern Cyprus, Antalya to Afyonkarahisar I’ve been traveling the globe since last week. The other day, a press member phoned me when I was on my way to the airport and asked me the following question:

“We hear that Turkish companies are having supply problems because of the geopolitical issues arising out of the situation in Syria and Iraq. What type of risk management you think Turkey should adopt for the future?”

I told him that we’re way past the point of risk management. It is a good, strong crisis management that we need. Risk management involves the design of escape plans within a model by calculating possible business risks. You do specify possible scenarios and you determine in advance behaviours that match these scenarios.

These models don’t obviously include “indispensable” conditions because it’s not always possible to predict what life will bring. Take Coronavirus for instance. How could we possibly know that we would be struck by such a terrible outbreak?

In the event where all the risks we know they exist but we didn’t take into account before are turning into reality, the only rational solution we can adopt is “crisis management”. Besides, we should learn from such failures because any business plan which is designed without considering the existing risks also reflects poor management.

Sometimes, you may need to tolerate people who failed in handling the risk management during the crisis management, in lieu of firing them, since they know a lot of things about the hellish situation that the company is in. But, removing those who make mistakes on a daily basis may be useful in terms of strengthening the sense of justice.

“Apparently we didn’t learn from the Russian Jet issue…”

I also told the press member what I think about the business people having supply or sales problems with Russia, Syria and Iraq. As a matter of fact, business leaders have been voicing geopolitical risks, frequent leader changes, and the effects of climate change at global conferences since 2015. Obviously, only the leaders of the world’s largest companies are invited to such events. Sadly, small businesses can’t voice their concerns on global level, being physically present with their larger counterparts. But the minutes of these meetings are made available online for everyone’s access. And many national news agencies translate these minutes into Turkish and share them with Turkish people.

However, due to the fact that young employees have low proficiency in English, these important reports and warnings are not taken into consideration by the company management, whereas these reports emphasize the importance of diversifying supplies and sales in the most efficient way possible.

In almost every presentation I deliver, I tend to stress the importance of avoiding making more than 30% of your profit from the same group, company or country, similarly you should maximum 30% of the product you buy must be purchased from the same supplier. In Turkey, most of the tourist facilities are still relying on Russian tourists despite the jet downing crisis. Some businesses export more than 60% of their products to Syria and Iraq, not to mention those who designed all their business processes and operations to meet the purpose of attracting Iranian, Syrian to Chinese tourists.

All this goes to show that most companies in Turkey create “opportunist” policies to make money, without even having a proper business plan. Sadly, the driving force behind this opportunist behaviour is these people’s eagerness to get rich quick. But, there are also some really decent institutions in Turkey where their leaders always try to diversify their customer and supply portfolio, always using the right risk management model.

We should that the circumstances we are living in are the new normal of the world. Therefore, it’s no longer possible to manage the companies using the 20th century paradigms. We must open our eyes and realize that, unfortunately, we are likely to face more wars, sorrow, and economic turbulences in the 21st century than we have ever faced in the past.

“Supply Chain must be managed properly…”

Here’s a more interesting situation: Some companies say that they are working with more than 10 suppliers, all of which are working only a couple of main suppliers. This is a risky situation indeed. The supply chain must be managed and monitored properly from the bottom to the top.

Accordingly, I suggest all Turkish companies to start implementing new methods for supply chain management and sales-marketing. It’s still not too late to abandon the “boss does it all” mentality.