Risk is the possibility of loss or reversal – or gain or advance. The risks that matter are the ones that pose a problem in our decision-making. We are surrounded with risks either with financial or non-financial. One of the biggest challenges in environmental decision-making is to develop better tools for risk intelligence.
In the Mekong River countries a very big challenge is to manage many risks associated with river basin management. Many production activities and markets depend on the Mekong River. Agriculture, hydropower supply and fishery are such activities. There are many business risks associated with natural resource management. Typically we can talk about production (or supply side risks) and marketing risks (demand-side risks).
In risk management it is important to identify different kinds of risks. For example, typical production risks are operating risks, supply chain risks, technology risks, workforce risks and asset risks.
Operation risks are happening when there are control or compliance failures or partner coordination failures. Supply chain risks are like supplier failure or political rapture. Supply chain risk is also key cost volatility. Technological risks include infrastructure breakdown and information security breaches. Workforce risks are capacity losses or disruption. Also key staff loss or defections are workforce risks. Very considerable risks are asset risks like counterparty credit loss, fraud or theft.
Typical marketing risks are security and political risks, end-market and customer risks, competitive risks, regulatory or legal risks or financial or economic risks. Security and political risks include market-disruption events and geopolitical volatility. End-market or customer risks are brand or reputation erosion and customer consolidation.
In markets competitive risks are always present. Disruptive technology and new entrants to the market are typical competitive risks. The government can create regulatory or legal risks like new legislation and litigation. Also official corruption can be categorized in this risk category. Financial market volatility and economic recession are typical financial or economic risks.
If better risk intelligence is wanted, just listing big risks is not enough. Only our imagination limits the conjectures, models, assumptions and guesses we advance to explain a risk.
The formulation of possible solutions is needed. It is necessary to invest in risk management systems and associated competences. Experienced staff to analyze and handle different risks is needed.
A lot of money and capital can be saved to better aims if the Mekong river countries manage their risks in a better way. Risk intelligence is about making choices bearing risks that our natural run of experience can really penetrate.
All this is easier said than done, but it is worth of trying.