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What’s up with “Regime-switching?”

 

The heading is very synonymous with regime change in political circles. Especially with the the events that are taking place in Afghanistan. The Taliban swept to power in a “flash”.

These are events which their consequences are ill-prepared prepared for by economic stakeholders but they do happen regardless of how small the probability looks like.

Risk never takes a holiday, even though it may appear excessively sleepy for long periods.

Coming to the world of commerce, regime switching happens when circumstances or events takes a sudden turn for example from a stable to a highly unstable environment or from being heavily regulated to a relaxed one and or vise-versa, from being a market leader to a follower.The list is endless.

The regime switching process is a very sudden and painful one for businesses especially if poorly anticipated for and badly managed. The process happen very vast leaving little to no room for regrouping to survive. This is the main tool disruptors are employing. Because of the flexibility in their ‘reflexes’, disruptors engage in games like these fully aware that incumbent’s reflexes are hard-wired and by the time they will try to flex themselves, the disruptors will be long gone.In regime-switching mode,all the assumptions crumble like a deck of cards.

The more the incumbents remain stuck in stakes of legacy technology, decisions, decision making,as well as business models, there more they are implicitly opening the ‘skys’.

The era of employing the methods like NPV in projects appraisal is fast disappearing as disruption do come way before the pay back.These methods tend to bolden the ridgedness of decision makers in pursuing the projects/ products that would have been overtaken by events long before, in search of that return.

With agility in full swing,anticipation to terminate some projects/products along the development stages must remail an option clear to all, including the reflexes bearers..

Proper risk-adjusted planning is now a requirement. Risk management is not a once and forget event.New thinking and dissent voices must be the order of the decision war rooms for any firm to survive where we are going.

_Clement Chirenje_ is a certified financial risk manager and is a risk partner at Entire Risk and Research.

_Call/WhatsApp @ +263773489899_

Tendai Guvamombe
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