COVID-19 has made companies believe in adopting approaches that can lead them towards long-term sustainability by accessing the risks – both prevailing and probable – in their businesses and the realisation is even more in the fashion industry. Risk assessment has already been at the forefront of the world’s leading and progressive apparel companies and the pandemic has just accelerated their endeavours in this direction.
CIEL Textile is one such company. As per CIEL Risk Policy, the Group undergoes a new risk voting exercise every 3 years. 2020 marks the second time that CIEL Group has gone through this process.
Risk Committee, Audit & Risk Committee and Head Office Management were invited to vote on the risks. 36 risks were voted, which comprised a combination of new and already existing risks. The result of the voting for risks led CIEL Group to identify 10 top inherent risks in 2020 – Global Recession; EU Blacklisting; Further COVID-19 Lockdowns in our Countries of Operation; Environmental Disasters; Politically-Related Instability and Unrest; Policy Changes; Cyber Crime and Investment in Weaker Economies; Cash Flow and Liquidity Risk; Business Turnaround; and Policy Changes. These 10 risks are further classified under three groups which are – Operational Risks, Financial Risks and Strategic Risks as shown in the table below –
|Risk Group||Inherent Risks|
|Operational Risks||1. Global Recession|
2. EU Blacklisting
3. Further COVID-19 Lockdowns in our Countries of Operation
4. Environmental Disasters
5. Politically-Related Instability and Unrest
6. Policy Changes
7. Cyber Crime and Investment in Weaker Economies
|Financial Risks||1. Cash Flow and Liquidity Risk|
2. Business Turnaround
|Strategic Risk||1. Business Turnaround|
2. Policy Changes
Out of these 10 risks, classified under three groups, CIEL Textile cluster of CIEL Group was severely (most) impacted due to 5 risks – Global Recession; Further COVID-19 Lockdowns in our Countries of Operation; Politically-Related Instability and Unrest; Policy Changes; and Cyber Crime and Investment in Weaker Economies. The Group had a response to mitigate risk of each kind and bring back businesses – that includes textile – on track.
‘Severe Risks’ hit the CIEL Textile subsidiary; response of the Group gives future outlook…
Response to Severe Risk 1: Global Recession – COVID-19 is an example of the major economic shock which has shaken the operations of the entire group as well as its textile business which is spread in 4 countries. In response to Global Recession, CIEL Group got funds provided by the MIC which is helping get Mauritius through the recession. In tandem, CIEL Textile is currently doing a strategic review exercise to adapt and to be better positioned for the ‘New Normal’.
Response to Severe Risk 1: Further COVID-19 Lockdowns in our Countries of Operation –The first lockdown had a severe impact on business globally and the second wave has pushed the authorities to enforce strict lockdown procedures again which has increased the ‘going concern’ risk of its subsidiaries – a catastrophic increase in financial, economic and social risk. The magnitude of aftereffects of further lockdowns as well as authorities’ response remains highly uncertain. “Our Group entities have done as much as they can for now and will be monitoring the situation closely in anticipation for the worst,” says the report.
Response to Severe Risk 3: Politically-Related Instability and Unrest – The political difficulties faced by many countries where CIEL Textile operates have the potential to lead to instability and unrest as seen in the past. Added woe to this is the impact of COVID-19, such as job loss and loss of life from the disease, which has heightened the risk of instability and unrest. As far as response of the Group is concerned, apart from the political violence and terrorism insurance CIEL Textile has in place, the various crisis committees across the Group remain on high alert in order to respond rapidly to the high risk events.
Response to Severe Risk 4: Policy Changes – As a result of COVID-19, Governments around the world face difficult decisions that have never been faced before and are therefore more likely to have unintended consequences. Management throughout the Group is tackling this risk by diversifying the customer base and also by geographically diversifying production. Maintaining good relationships with Governments is also key.
Response to Severe Risk 5: Cyber Crime and Investment in Weaker Economies – The global growth rate of cyber-attacks is alarming, with each attack becoming more sophisticated and more costly to the victim. It now goes without saying that businesses should always remain vigilant. CIEL Textile subsidiary is no exception. CIEL Textile is noticing more sophisticated attempts of cyber-attack as each year goes by. “However, our response capabilities are improving faster owing to the good cyber governance and security measures put in place. CIEL is confident of further mitigating this risk in future,” says report.
The aftermath of COVID-19 may leave weaker economies more vulnerable and less able to recover from the economic shock. In response, CIEL Textile continues to diversify business geographically and is always on the lookout for new opportunities to do business.