Although tech is transforming the business landscape across Africa, and creating opportunities, it is important to note that it comes with its special risks (and these require careful navigation). Many people think it is impossible, seeing that the shift to using digital tools has helped to serve customers better and scale faster in business. However, this digital shift comes with risks that have to be managed and mitigated properly to avoid costly repercussions. Recent statistics show that in Nigeria alone, over 40% of tech startups fail within their first three years, mostly due to preventable risk factors.
This article aims to explore how to manage and mitigate risks in the tech industry. Let us begin by understanding these two key concepts:
- Risk management:
This process solves the problem by asking what could go wrong, how serious the consequences might be, and what particular backup plans should be in place.
- Risk mitigation:
This process doesn’t aim to prevent risk, but reduces the harm if something goes wrong. Here, you take action to either reduce the likelihood of problems, or to minimize their impact when they occur.
POTENTIAL RISKS FACED BY TECH COMPANIES
Here are a few examples of risks that Tech companies especially in Nigeria and Africa face:
- Power and internet unreliability:
Business owners whose business is not power operated may consider this a minor inconvenience, but Nigeria experiences an average of 4-6 power outages per week according to World Bank data. Power and internet unreliability can completely disrupt operations and affect your customer’s trust.
- Cybersecurity threats:
This is a constant concern for both small and large tech businesses as our digital economy continues to expand. Many e-commerce businesses underestimate their cyber vulnerability because they assume they’re too small to be targeted.
- Global competition:
The highly competitive international tech landscape presents another risk factor. Innovative ideas e.g apps and software can be replicated almost immediately. Therefore, proper safeguards and differentiation strategies have to be put in place.
- Rapid evolution:
Technology evolves at a dizzying pace globally, therefore staying up to date itself can be risky. Solutions that seem high tech today may become obsolete tomorrow (hence, adopting technology without considering its longevity can be as risky as not adopting it at all).
- Ever-changing government regulations:
This example explains why this can also present a risk: If fintech regulations are changed today in Nigeria, some companies will be forced to completely rethink their operations to remain compliant.
WAYS TO MITIGATE AND MANAGE THESE POTENTIAL RISKS
Fortunately, there are practical and affordable ways that African businesses can address these challenges without making too many budget changes. These include:
- Power and internet issues:
Beyond generators, you could also use hybrid solutions. This could include the more sustainable solar power, and/or battery backups. Internet issues can also be solved by using cloud services that offer local caching and offline synchronization. This can help you maintain operations when there is no power.
- Cybersecurity issues:
This requires constant vigilance and staff training. This training could include real-world simulations of phishing attempts (for hands-on learning). Also, consider partnering or collaborating with local cybersecurity firms that can provide affordable protection for your business.
- High competition:
When in a competitive business with both local and global brands, constant innovation is needed. To avoid the risk of having your innovative solutions bought or stolen, use patents and trademarks. After innovation, an excellent customer experience also gives you an edge
- Rapid evolution:
The major risk tech businesses may face is financial constraints due to spending money on sudden upgrades. The best way to tackle this is by setting an emergency fund aside while drawing up periodical budgets, and at the same time keeping an eye out for collaboration opportunities. Collaborating with local tech hubs and universities provides access to emerging talent and ideas at minimal cost.
- Regulatory changes:
The best way for your business to navigate this is to stay in touch with industry groups that are actively engaging the government. This way, you stand to gain early warnings of potential changes, while cultivating strong relationships with professionals.
HOW TO EFFECTIVELY MANAGE AND MITIGATE RISKS IN THE TECH INDUSTRY
Risks in tech could mean a lot of things: security breach, loss of reputation, system vulnerability. Therefore, managing and mitigating tech risks requires an even more proactive method. Tech is such a data-sensitive and ever-changing landscape that it requires speed, innovation, flexibility, strategy and protection to effectively manage and mitigate risks.
Here is a guide you could use for your tech business:
- Begin with a comprehensive risk assessment that covers all categories. This helps you identify all areas of exposure.
- Create a priority scale for risks in the order of ‘most likely to happen’ and ‘most likely to have the worst impact’ so you can focus on what matters.
- Deploy mitigation strategies per risk type.
- Consider sharing risk either by outsourcing core functions or by partnerships.
- Monitor regularly and closely. Note it if anything changes.
- Create awareness among members of staff. A risk-aware culture helps manage and mitigate risk.
The risks in tech are as much as its rewards, and all of the potential challenges are undeniable. However, the difference between a failed tech startup and thriving tech giants is proactive and effective risk management and mitigation. Always remember this: risk is not your enemy; complacency is.
Are you ready to future-proof your tech business?
Book an appointment with us at BizVitalSigns now, to speak with one of our advisors!