Competitive intelligence - key to corporate risk management

July 2003 Security Services & Risk Management

Risk has always been part of the operational environment of organisations. It is something that neither the SMME owner, nor the large multinational can escape.

As we all know, events are interconnected, and thus the operational environment is in constant flux. International, national, regional and even events at the suburb level have a direct influence on how organisations will perform. Uncertainty about the future and risk goes hand-in-hand, and the only way to minimise this risk is to try to understand and predict possible futures.

The King II Report clearly states that the management of organisations is responsible for the organisation and its well-being and that they must be held accountable for their actions. The management of risk in different environments is mentioned of one of the areas in which management must be held accountable. Unfortunately many organisations have equated risk only with physical security and not with other aspects within their operational environment. This has left many organisations blindsided by sudden changes. This can be seen on many different levels from the local liquor store owner who now faces the prospect of increased competition through new legislation to big mining houses that banked on a weak rand and prolonged war in Iraq.

These changes have significantly increased the risk factor for these organisations, though they have nothing to do with gates and guards.

Enter competitive intelligence

A solution to this 'intangible risk factors' is the implementation of a competitive intelligence (CI) process within an organisation. CI is a process in which information about the operational environment is gathered in a legal and ethical manner, that can be analysed and used for decision making purposes. This can be done irrespective of the size of the organisation. From SMMEs to multinationals already enjoy the advantages that CI holds. It is easy to recognise them too. Just look in your neighbourhood; why does one café last for years and others change owners like clock work? It simply means that one owner understands his business better than the other and that he can act upon the demands of his customers. This owner would be quick to tell you where his competitive advantage lies.

The greatest risk that any organisation faces is the prospect of extinction. This may sound like something that we only refer to when we talk about dinosaurs, but it happens... For example, whole companies were destroyed during the 9/11 attacks, floods can wreck whole towns and in the case of SMMEs a fatal car accident can 'take out' the sole proprietor of a company.

What does CI do?

As stated previously, CI is a business process and if managed correctly can yield tremendous results not only in terms of gaining a competitive advantage in the market place, but can also serve as tool to minimise operational risk.

A good CI programme should include a regular assessment of the macro environment. For example, in the case of 9/11 an environmental scan should have shown that there have been previous attacks on the World Trade Centre (WTC), terrorist groups have stated before that the WTC is a target of Western culture, hijackings have taken place before and the US government has warned before that high density areas would be targets for terror attacks. Keeping all these pointers in mind, any company having offices in the WTC should have considered the associated risk of this location.

International and national trends all have an impact on the day-to-day operations of companies and most significantly on the bottom line. Mining houses and exporters in South Africa are currently complaining about the strengthening of the rand and in reading their comments it is almost as if they never considered that the rand might actually recover again. Keeping a close eye on the markets should have at an early stage pointed to the fact that the rand is indeed on a recovery curve and that it did not 'just strengthen' in a matter of minutes.

A CI programme can also provide early warning about new products, competitors or legislation and thus minimise the risk of being 'caught out' by developments. Only those who do not plan for tomorrow fear the future.

CI and corporate governance

Some will argue that gathering intelligence on the operational environment does not concur with good governance practices. Recent headlines told of espionage, blackmail, bribery and theft in the corporate sector. All these activities are related to unethical and illegal activities, which should never be part of a CI programme. So much information is available in the public domain and through legal and ethical avenues that it is almost shocking to see that companies are still willing to revert to these types of activities. A good CI programme will provide effective risk assessment information without compromising good governance.

In South Africa the South African Association of Competitive Intelligence Professionals (SAACIP) promote the legal and ethical collection of information and its members adhere to a strict code of ethics and professional conduct. SAACIP members concur that CI units can in many instances claim a moral high ground within their companies through their day-to-day conduct that can serve as an example to others.

Companies being caught (and they all do at some point!) 'spying' through illegal and unethical methods also run the risk of being exposed and thus bring their company into disrepute in the public domain.

Conclusion

It is only possible to manage risk if a proper investigation into the operational environment is done. Companies with a good competitive intelligence programme in place, that includes a counterintelligence function, have the edge over competitors in that they can plan for changes in the operational environment. Risk does not only comprise physical threats to the organisation, but it is also about uncertainty in the market and competitive intelligence can provide a framework to limit this uncertainty.

Increasing the competitiveness of an organisation through a process of planning, collection and analysis is a relatively inexpensive way to minimise the risk of being surprised by changes in the operational environment.

About the author: Bernard Odendaal is a project manager with CBIA, Africa's oldest registered competitive intelligence consultancy and an Executive Committee member of the South African Association of Competitive Intelligence Professionals (SAACIP). He is also currently enrolled for his Master of Security Studies at the University of Pretoria where his dissertation deals specifically with CI in the South African environment. You can contact him at e-mail bernard@cbia.co.za





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