CNV1-I1-7-Business Risk

Let me begin with an interesting anecdote and I would request you join me in this journey of imagination with empathy and not as a reader. Imagine you are a captain of a ship called Tia. This ship has a safe cargo carrying capacity and is assigned with carrying merchandise to the markets in remote islands and selling it to the customers at far-flung places with a profit. You as a captain, have been undertaking this work for ages, know your markets and have a loyal base of customers, you know which product to carry for this long journey that sells, gives you maximum profit and satisfaction to your customers, who wait for your ship to arrive and pick from whatever is there in the ship. You move from one island to another selling your products and then return after most of the produce is sold. Let us now imagine that your journey takes a long time and you do not have very sophisticated handling and storage systems in your ship and as a result two things happen. One, the products you are carrying deteriorate with time and a percentage of it gets rotten on the way for which you have devised a smart set of techniques, which include picking the produce at a stage that maximizes shelf life, checking the product frequently in-transit and rejecting part of the produce to avoid contamination of the whole lot. On your long journey, you keep checking and throwing what is getting perished so that it does not impact your other products.

Secondly, the products are not as fresh in usage by the customers as when you picked them up, however in the absence of any option, there is no complaint, but for cases, when the things were really bad. In such cases the customer becomes happy in case you replace a part of such damaged material. In the absence of any idea of how the fresh produce tastes, your customers have developed a palate for what you bring and assume this is how a fresh product should taste. However, off late, ships from other countries have also started doing a similar work but with different sourcing, packaging and supply chain and as a result they are able to supply fresher products at cheaper rates and in attractive packaging.

In the initial stages, you used to scoff this as humbug and boast “My products are like cigars, you will hate them initially and it will take time for you to develop a taste for it. But once done, you will swear by it and will not change your pack for 100 dollars”.

You are already noticing that as a result in the past few months you are not able to sell everything in your trip and have to bring the leftover back, a major part of which gets spoilt. To overcome this towards the end of your trip you have started giving heavy discounts and as a result able to almost empty your ship.

Other challenges you face for safety in your business (sea) journey are:

• The sea at places is accident prone due to reefs in certain parts and floating icebergs around.
• Tribal pirates around the island enroute. Being an experienced captain you need to steer these islands taking a longer detour. Further your gunners are on alert and ready to kill anyone coming closer to ship after giving warning to stay away.
• Throwing of waste materials in the ocean, as you are not supposed to do that and if caught, it has serious repercussions.
• Your crew is not willing to continue in the journey.

To summarize as the captain of this ship, you are continuously placed with the multiple challenges, which fall under the two broad categories:

• Challenges faced in ensuring that the cargo reaches the customers.
• Challenges related with overall acceptance of the cargo by the customers.

Himanshu Nautiyal, Head - Business Excellence, WCM and Sustainability (Chemicals, Fertilizers & Insulator Business), Aditya Birla Group.

Let us now take a pause and come back to reality. Can you relate with the captain of this ship and the challenges faced by him with the challenges faced by you and your organization? Before we move on, let me ask you a question, what does sustainability mean to you? To me sustainability means identification of all forms of risks and mitigating them proactively. This may sound easier but is very difficult for the world (we live in today), which is called as a global village and wherein the flow of information is very fast. I must add here whatever we say, ‘Black Swans’ will come and create havoc. Your role with your team is to identify it coming and hitting it so that it creates minimum damage. Where do you think, Black Swans come from and why are they difficult to identify? How many of us anticipated Trump winning US presidency and demonetization in India? Are they not black swans? Let me repeat: Identify Black swans from a distance and find a quick solution, are the key to success.

If I have to share with you a real-life example to appreciate different facets of business risks, I think, it will only be logically right to begin with ‘Titanic’ in this edition.

On April 2012, Titanic completed 100 years of its dooms day in its maiden journey, which also happened to be its last. It sank and remained untraced for 73 years until at 12.48 am on Sunday 1st September 1985, despite numerous serious attempts, until its wreck were located, by a joint FrenchAmerican Expedition, about 370 miles (600 Km) South-Southeast of Newfoundland, North Atlantic Ocean about 13.2 miles from the inaccurate position transmitted by the crew of sinking ship. The discovery made headlines around the world. Titanic hit an iceberg just before the midnight on April 14, 1912, that ruptured at least five of its 16 hull compartments near the bow & since the compartments were not sealed at top, water from the ruptured compartments overflowed and filled succeeding compartments, causing the bow to sink and the stern to be raised up to an almost vertical position above the water.

SOME KEY FACTS RELATED TO INCIDENT :

• Titanic, the biggest ship of its time and termed unsinkable was built in 1912. It was 275 meters from stern to bow, had a gross weight of about 42,000 metric tons, and its hull was divided into 16 compartments that were presumed to be watertight. Because four of these compartments could be flooded without causing a critical loss of buoyancy, the Titanic was considered unsinkable.
• The Ship on its maiden voyage hit an Iceberg, which it saw very late and at the last moment tried to steer and was hit from the side that led to two big holes on the side of the ship leading to water gushing in.
• It was carrying a total of 2200 passengers, of which 700 were first class passengers which included some of the most famous of its time.
• There were 16 wooden lifeboats and four collapsible boats the ship carried with a capacity to accommodate 1,178 people, only onethird of Titanic’s capacity, but more than legally required. More than 1,500 people went down in the sinking ship or froze to death due to the shortage of lifeboats and lack of satisfactory emergency procedures. A lifeboat drill, scheduled for April 14, was cancelled for unknown reasons
• The night was clear and free of fog, so really there was no reason to hit the iceberg at all. The disaster could have been averted if he had a pair of binoculars to see further.
• Titanic was warned that there were icebergs in the area, and even of some specifically big ones. But the men in the bird’s nest didn’t see the actual hunk they hit until it was too late.
• Just 37 seconds elapsed between the sighting of the iceberg and the collision. First Officer William McMaster Murdoch ordered the ship to turn, but it was too large to do so in time.
• There were 7 telegraphs warning about the poor weather, but they were all ignored for no reasons.
• A ship Leyland liner Californian, had been less than 20 miles away at the time of the accident but had failed to hear the Titanic‘s distress signals because its radio operator was off duty.
• One hour and 20 minutes after the Titanic went down, the Cunard liner Carpathia arrived. The survivors in the lifeboats were brought aboard, and a handful of others were pulled out of the water.

The Titanic disaster led to many improvements notably:

• Formation of International Convention for Safety of Life at Sea (SOLAS), an international maritime treaty which requires signatory flag states to ensure that the ship flagged by them comply with minimum safety standards in construction, equipment and operation. An International Ice Patrol was established to monitor icebergs in the North Atlantic shipping lanes.
• Doing away with design flaws by building ship with double hull, a technology which was available since 1850. A double hull is a similar concept to bulkheads. The Titanic bulkheads weren’t truly watertight as the compartments were not sealed from top allowing water to overflow from one compartment to other.

I am sure, what has been pulled together here is enough to conclude that any disaster that takes place, when analyzed, is linked to a series of lapses on multiple fronts- right from design stage to adhering to practices. Are we not having Titanic tragedies even today? Can we reflect on the Bhopal episode? And what about Space Shuttle Columbia disintegrating during its re-entry into the earth’s atmosphere leading to the death of all seven crew members including our beloved Kalpana Chawla?

We will take up some more issues and aspects in the next issue. Meanwhile, I have done my job here if this article has left you thinking: Could we avoid these episodes and what is the leadership role we could play?