Dealing With Risk And Uncertainty in the Business

Risk can be defined as a decision-making process in which all the possible outcomes and their chances of taking place are predictable to the decision-maker. At the same time, uncertainty refers to a scenario in which neither the creation nor their possibilities are unknown decision-makers. 

Cyberattacks 

Nearly all transport industries are exposed to cyber risk. As a result of technological developments in the transportation sector and their function in automation and supply systems, cyber crimes pose a significant risk. Third parties, such as suppliers and partners, spread this risk. Jumia, an online shopping company, has put several measures in managing cyber attacks. These include; always maintaining the security software. The company has protected its computers with anti-spyware software, firewalls, and anti-virus. Their information and technology team ensures that all updates are done on time. Besides that, they encrypt all data either in motion or at rest (Martens, 2011). The data remains safe when lost or stolen. Jumia Company also deletes unnecessary data from the files. Unexciting data cannot be stolen. 

Jumia Company also separates old data to enable extra protection. The c company uses air-gapped networks to store data and protect it from breaches. It is done physically using a flash drive. A wireless device reduces the risk of physical attack, hence providing security from external attack. Jumia Company safeguarded their data by restricting access and only allowed employees whose duties required them. They give a logging history that indicates who accessed which data and at what time, for accountability reasons. The company also offers regular pieces of training to employees to sensitize them. The employees are required to observe specific behaviors when handling company data. The employees can reduce errors that might lead to data breaches by cyber attackers. 

The risk of driver shortages 

It is a risk that has continued to grow in the transport industry. It is a result of the aging population of experienced drivers and increased demand in the transport sector. The recruits face several challenges that make them unreliable. The risk of driver shortage may result in secondary hazards such as pressure on-time delivery and fatigue due to working overtime on the roads following an accident's threat. The company has taken necessary actions such as recruiting standby drivers to ensure they always have enough drivers. The company also provides occupational insurance covers to protect drivers in case of accidents. 

Deteriorating Roads 

Roads are increasingly becoming dangerous for most vehicles. The problems include road destruction, missing road signs, and potholes. Besides these, the authorities also take long periods to respond to these damages. As a result of these, the company incurs extra costs on fuel due to traffic congestion. Delays on the road may lead to canceled transactions and damage perishable goods as well. The congestion has been increased further by the coronavirus pandemic. Drivers have to make several stoppages to undergo coronavirus testing at various points. As much as this risk is out of the company's control, the company has appropriate response measures. The company has started to utilize the reviving railway industry. Most trains are now modern therefore take a few hours to reach their destination. The company is, therefore, able to deliver most of its orders within the stipulated timeline. To add to that, the company has opened pickup stations around the railway offices to reduce the cost of further transportation. 

Advice for improving risk management 

Regularly monitor and review activities. Risk levels we encounter continually change as new risks emerge, and others become less important. Proactiveness and regular monitoring of the exposure puts you in a better position to act when the chance happens. It is also vital to put in place a risk management process (Ogawa, 2006). It involves training employees on what constitutes a risk to enable them to know what to aim at and their contribution to risk management. 

Have a risk register and document all the risks. When you capture all the stakes in the company, you will see the entire risk exposure's more significant look. It will enhance accountability and information sharing. Don't forget to document specific responsibilities and chose a risk owner as well. 

Employ appropriate strategies in managing risks. Apply the 4Ts model to decide on how to manage risk. The 4Ts are; 

Transfer the risk: Assign a specific group or a third party to take responsibility for the trouble. 

Tolerate the risk: Take no action to mitigate the risk and monitor the risk. 

Treat the risk: Control risk through actions that minimize the likelihood of the chance to take place. 

Terminate the risk: Altering practices to get rid of the risk entirely. 

Learn from previous mistakes. Learn from past mistakes by using historical data and information and make sure they are not repeated. 

Take ownership and responsibility. When you notice something is wrong, for example, a potential security issue, safety issue, or suspected fraud, take responsibility and don't wait for someone else to fix the problem. Everyone in the company should be empowered to speak out and act appropriately 

Identify the risk in good time. It is advisable to start thinking of the threat as soon as possible to manage the risk. It should take place at the beginning of every project. 

Lastly, be positive. Not every risk is adverse; therefore, don't just focus only on the downsides. 

An adverse selection problem 

It refers to any scenario where one party in a particular transaction has more material knowledge than the second party. Jumia, as a delivery company, faces an adverse selection problem at various levels. For instance, an adverse selection problem exists between the drivers and the company. The drivers are aware of the shortest routes but may still decide to use the long ways because this will earn them extra time allowance. It may be expected during this period of coronavirus pandemic. The company will incur additional costs when the drivers decide to use unfavorable routes that will earn them extra allowances (Dawson, 2014). To manage this, the company needs to sensitive its drivers to the benefits of professionalism's moral ethics. The company can also use its management team to devise specific routes that fall within its budget. 

Moral hazards in the distribution industry 

A moral hazard is a scenario where one party subjects itself to a risky event knowing it is protected against the risk, and the other party will incur the cost. From the company's perspective, moral hazard has been a case of interest in carrying out various responsibilities. Jumia, as a distribution company, experiences different actions that result in problems that stir up mixed reactions. 

After documentation in the distribution of goods is achieved, observation of the result may occur. Still, difficulty in the whole service process's supervision may result in the supplier taking action, contrary to the principal, and damages his interests. Whenever the company tries to simplify the procedures involved in distributing goods, it increases the moral hazard occurrence probability (Cai, 2020). It is attributable predominantly to the need to realize high profits through cost reduction, thereby resulting in lower service quality. 

One of the significant moral hazards in the company involves revealing the business secrets of the customers. The company has the responsibility to keep the secrets of its customers regardless of the situation. Still, some of them have revealed the customers' business secrets to the competitors due to loose management and interest driving, resulting in a considerable loss. The company has responded to this situation in various ways with aims to improve productivity. These include devising strategic plans that will monitor information retrieval, increase the security of information within the company's database, and provide a reliable platform for customers to feel protected against fraud. 

Principal-agent problem 

A principal-agent problem occurs when a conflict of interest exists between the agent and the principal, triggered by the agent acting solely in his/her interests. Jumia, as a company, has broadened its market to the extent that it serves a vast geographical area. The company has segregated ownership from management, thereby resulting in endless advantages as it does not have any implications on the business's regular operations. 

The principal-agent problem in the company appears between the stockholders of the company and the customers. The company stockholders' attempts to raise the selling price of the products have, on many occasions, stir up problems with the company's customers. The sudden unnecessary rise in the price of commodities to be supplied disappoints the customers, and they boycotted the products sold by the company. It results in principal-agent problems within the company. 

The company has resolved to reduce its cost due to the customers' behavior by offering them an incentive for alternate action. These incentives include reduced delivery cost by a percentage and increased quality of the products provided in delivery. Delivering products at a reduced price has been received significantly as many customers have registered for the products. It has dramatically increased the profit margins realized by the company. 

Organizational structure and profitable improvements 

The organizational structure of the company involves a system that outlines how activities are conducted within the company. The hierarchy in the company's management, from professionals in all the company departments, forms the company's backbone. Organizational structure plays a crucial role in carrying out activities that are aimed to improve service delivery. 

JumiaCompany has set up its organizational structure in a specific way to accomplish different company goals. The company adopts a functional organizational structure that has departmentalized the business according to the expected job functions. The company has attempted to group all the marketers in one department (Marketing department), then the sales team in another, and customer relations in another. The structure gives employees room to specialize in the field they are based in, giving them opportunities to improve their skills and expand their knowledge. It helps facilitate clear accountability of employees' work. 

When the company changes its strategy, it often has to adapt the business structure to ensure the relevant elements continue to support each other. Since a company's goals are aimed to improve service delivery and increase its benefits, which are accrued through profitability, it is highly suggested to improve the organizational structure to help anneal problems associated with the old system(Burke, 2016). The following suggestion can be used to improve the company's profit margin. Firstly, scrapping off the department. It may be viewed as a solution since departments are distracted by the department goals instead of the company ones. By merging the departments or reducing the number of available departments, the company may register progress in terms of cost incurred in running the departments. 

Secondly, the company's attempts to enlarge its operation scale means that new markets need to be addressed positively to match its operation. It involves reacting to product or service demand changes by keeping up with new technologies to enable fair competition. Profit can be increased should the changes be implemented since the company will be subjected to a broad market. Lastly, partnerships also form the basis of improvement in the business as it brings in new ideas that can help bolster the company's progress in the market acquisition. 

Referencing 

Dawson, D., Searle, A. K., & Paterson, J. L. (2014). Look before you (s) sleep: evaluating the use of fatigue detection technologies within a fatigue risk management system for the road transport industry.  Sleep medicine reviews ,  18 (2), 141-152. 

Martens, B., & Teuteberg, F. (2011). Risk and compliance management for cloud computing services: Designing a reference model.  Risk ,  8 , 5-2011. 

Ogawa, S., & Piller, F. T. (2006). Reducing the risks of new product development.  MIT Sloan management review ,  47 (2), 65. 

Burke, P. J. (2016). Undermined by adverse selection: Australia's direct action abatement subsidies.  Economic Papers: A journal of applied economics and policy ,  35 (3), 216-229. 

Cai, Y. J., Choi, T. M., & Zhang, J. (2020). Platform supported supply chain operations in the blockchain era: supply contracting and moral hazards.  Decision Sciences .