Using risk analysis in strategy, tactics and scenarios.

Strategy in action

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Very few people understand that strategy is not a tactic, strategy is first?to identify the destination, the end goal, or where you want to be. The trick is choosing that destination and then creating the method or tactics to get you there. A good strategy is understanding why we want to get to that destination or follow that path before we map out the plan of action or tactic as a journey to reach it.

?Strategy is only a good strategy when you have clarity. Clarity of purpose is essential. What will happen when you get what you think you want? Are you prepared for success, how will you deal with failure? What paths can you take if one path does not work- where are the exit points on your journey? Only when you have the various scenarios mapped out, is there a strategy in action and can you create the correct tactics to achieve the outcomes. Tactics are how we achieve those goalposts and are an integral part of the strategic journey.

It would be easier if we understand personal strategy.

Far too often we are not clear about what we want. In our personal lives, we will state we want to retire at 55 or leave the country. By simply stating those desires we feel we have stated our strategy and somehow miraculously believe our universe will provide. We have no tactics to get to the end goal except a wing and a prayer. We do not understand the rules of the game we are playing or even those who are in the game with us. We do not understand our strengths, weakness or see the threats and opportunities in our path to that end goal. The end result is a life of debt and breakdowns of relationships. No amount of good decisions will rescue a bad strategy.

?How do we create a personal strategy and use it in a decision-making process?

For example, I could apply this to a situation where I wish to leave SouthAfrica. Let's say I wish to leave South Africa and move to the UK. We call the game “My move”?I am the chief player, but the other players in the game are my family, friends and my pets. The scope of the game must look at the field of what I feel is important to my happiness. I, therefore, need to analyse what I need for personal happiness. In this game, I will look at my ten top concerns.

?Step 1: Identifying my top concerns

1. Family ties
2. Income security and job availability
3. Safety (law and order)
4. Political situation
5. Cost to move/finances after move and finances if I stay.
6. Friends and my pets
7. Health services
8. Asset accumulation for pension comfort
9. Environment, weather and travel opportunities
10. Culture shock

?Step 2 finding out the situation

My strategy should now include the task: "ask questions":

1. Family ties: Would my family be able to join me? Would they want to?
2. Income security and job availability: Are there job prospects and health services in that area?
3. Safety: is it safer for me to travel or live as an older person?
4. Political situation: Have I looked at the political, economic and social aspects?
5. Cost to move/finances after move and finances if I stay: Will my quality of life be better or worse?
6. Friends and my pets: How will they be affected? Can I afford my pets in the UK? Would they move?
7. Health services: Will health services be better or worse, from applicability and affordability?
8. Asset accumulation for pension comfort: Will I be able to retire comfortably?
9. Environment, weather and travel opportunities: Can I survive cold weather? Will I be able to manage a different culture? Are there available travel opportunities?
10. Culture shock: Will I adapt to small houses and a multitude of people in my space?

Step 3 The SWOT analysis

At this point let us assume the game is still on as I have over 50% yes answers.

Asking questions has told me I need to go to the next step of the game. In my next step, I will identify the players in more detail and how they will interact. It will give me the strategic direction and start the foundation for the tactics I will need and the flags I can use when I get my scenarios going. My second step is to look further into my game by analysing my strengths, weaknesses, opportunities and threats (SWOT).

?This is a quick SWOT analysis of my concerns.

The Game is moving to the UK:

Strategy constraints I will used in the game:

• Cost analysis of move with visa costs R300?000.
• Income available in sterling after moving for house deposit ￡ 68?000
• Cost of acceptable housing ￡300?000 (I want to take my pets) and live in a middle-class area.
• Salary achievable at around ￡30?000 for my age group and the area identified

Moving to the UK SWOT 1

Strengths: I can work for another 6 years there, have a good work ethic and an ability to learn. I have some family whom I can rely on to help with the move. My family have said they will consider moving with me and work for them is available due to work transfers in Leeds. The environment has history and walks which I enjoy.

Weaknesses: I like warm weather, wildlife as a travel destination, and dislike crowds.I will have diminished assets once I move.

If I earn?what was stated as average earnings for my age and qualifications my take-home pay will be ￡24,062 after tax and National Insurance. The average tax rate is 19.8% and the marginal tax rate is 32.0%.

I do not understand the legal system and will have to study in my area of expertise.

Opportunities: work in my area is available.

The rich history and easy accessibility to Europe can give me writing opportunities to increase my income.

Threats: income-earning to the affordability of life in the UK.

A quick analysis of house prices shows there will be a problem in being able to afford a place to have pets in an area in which I am comfortable living. Unemployment in the area is at 10%.

Pension would be reduced due to work time of only 5 years before retirement.

There will be a culture shock.

Health costs with items outside the NHS. Specialists and hospital procedures are constrained in the elderly on the NHS.

My family may not like the UK and may even decide to move elsewhere such as Australia or the USA.

Staying in South Africa SWOT

Strengths: I have assets and friends here.

My close family is here.

I have a paid-off house and car.

The environment has lovely weather, beautiful country and wildlife. Travel is easy and the weather lends itself to camping holidays which I prefer.

The country has a strong legal system and I like the people, speak the languages and understand the humour.

My medical scheme gives me more comprehensive coverage than the NHS.

Weakness: My strong dislike of the racial overtones in South Africa.

Distrust of the political players.

Medical schemes costs and security.

After allowable deductions, my average tax rate is 21.69% and the marginal tax rate is 31.0%.

Opportunities: I know the culture, area and languages, and have assets I can use to

My job is 70% secure for the next two years at least.

Pension is on track for an acceptable SouthAfrica Income replacement at a contribution rate of 27.5% of income, affordable due to a paid-off house and car.

Threats: Safety due to high crime.

Severe racist legislation.

Political corruption.

Unemployment is 43%.

Medical inflation and pension earning ability.

General Inflation due to political corruption.

?I can now see where my problems are in my situation and what is important to me.

?In my SWOT analysis, I have identified topics I must explore before I can make any tactical decisions on how to move forward. The two I will choose first income security. I rank this the highest after family ties. I have determined Family ties will be my highest ranking and I will need to play my scenarios in my list to get decisions I can present to the "Family" before engaging in that exercise. This is a tactic in my strategy. I start then looking at each scenario as a unit in my larger scenarios and I will then stress test.

Scenario 1 Income security.

I can run two scenarios for my game of whether I move or stay using my chief concerns to identify the flags I will need in this game. My first scenario will be a stay in SA scenario and a second move to UK scenario.

In the income section of my scenario game, my flags are jobs advertised, bond costs and Gini coefficients. Gini coefficient is a statistical measure of distribution intended to represent the income or wealth distribution.

Using the excellent statistics both the UK and South Africa have in place I can easily determine my answers.

I use the area of work education to determine my criteria, as this is the area I would prefer to work in.

32?572 jobs were available 49 advertised in Leeds to 549 jobs advertised in South Africa on major platforms-

Outcome 1- it is easier to find a job in the UK

?Gini coefficient in South Africa - is 63.0 and in the UK 34.8-a[i] higher Gini coefficient means greater inequality so indeed I would get employment easier in the UK and have a better chance of a higher income and less poverty.

Outcome 2: the UK is safer for income security due to work-related earnings.

?Now I stress test with a housing bond at a cost of ￡300?000

My average budget costs would be

My bond cost would be around ￡1,069. If I take my average living costs at ￡1,780, then I need ￡2849 per month or ￡34?188 per annum as a minimum salary. However, if I factor in holidays ￡36?744 is the minimum salary to live on the similar standard I do in SouthAfrica.

Scenario Problem Identified: the average learning and development specialist salary is around ￡35,000.

Stress test Decision outcome: living style or travel would have to reduce in the UK

Scenario outcome-. The UK will not offer a better standard of living unless we?are prepared to locate to a far smaller property in a less desirable neighbourhood.

Income decision South Africa is the winner due to a paid house in a good area and income security of 2 years. Hower the Gini coefficient shows a real danger to my lifestyle and would require further analysis.

?Scenario 2 Is the UK safer?:

?Gini coefficient has highlighted income inequality which normally translates into higher crime. In safety, my flags are terrorism, murders, violent crime, and car accidents. I will then apply this specific to Leeds.

Murder in South Africa is around 35.8 per 100?000[ii] UK 1.20 per 100?000

House robbery was 1 in 100 houses[iii] to South Africas 5.43 per hundred houses[iv]

I stress tested this scenario with knives and firearms.

Knife crime is around 100 per 100?000 of the population in the UK while in South Africa 53 per 100?000. However, South Africa has firearm crimes at 35 per 100?000 while the UK sits with 23/100 000.

Chances of crime then become 1.1242% for the UK for?my chance of crime while in SA it is 5.5538% giving me a clear indication of 99% chance of safety in the UK to a 94% chance in South Africa. That is fairly substantial.

Stress test 2 on my scenario was terrorism

The terrorism threat in South Africa seems stable at serious with the police and authorities being on the alert. South Africa has good policies in terrorist prevention.

In the UK terrorism is expected to increase due to Afghanistan. The threat to the UK (England, Wales, Scotland and Northern Ireland) from terrorism is now substantial[v] The UK also has good policies on anti-terrorism. The data is inconclusive against South Africa

Stress test Decision: The evidence is clear I would be safer in the UK statistically than in South Africa from crime, except for knife crime and terrorism which is not so clear cut. Further analysis is required.

Stress test 3. Vehicle safety

Car accidents are ?5 deaths per 100,000 in the UK and 22.4 per 100 000 in SouthAfrica[vi] Leeds city is not advised to use a car due to traffic congestion. The stats had this at 46 per 100,000

Stress test Decision: I would be safer from car accidents in the UK overall but not in Leeds.

?Stress test 4 How does crime affect living conditions in Leeds?

Leeds is?the most dangerous major city?in West Yorkshire, with a 4.7% chance of violent crime[vii]. It is 143% more dangerous than the national crime rate.

Scenario outcome- overall safety is better than SouthAfrica in the UK but not in Leeds.

?Step 5 Identifying the importance.

As a human being, I have biases. These biases may be unconscious. To work against such bias?and add to my strategy I could use a pugh or decision matrix to weigh this list of concerns. Pugh or decision matrix apply a weighting?to the various concerns I have. For example, I may give a rating of 5 to my safety and 1 to the culture shock. Safety would be multiplied by the factor 5. to give me a mathematical total to help me decide on moving or staying. The option with the highest?number would be the option I would follow.

?Business application

In business we will do the same exercise as I have done above, we will state we want 80% of our income to come from offshore, or 95% of customers to be happy with our services, we have to put in the tactics to get there, identify the flags and the tools to measure our progress. These flags may be Key success indicators. The flags may be quantitative or qualitative, but they should always be measurable to our success in that strategic path.

?I hope you found this exercise in using scenarios and stress tests to be useful.

?[i] https://worldpopulationreview.com/country-rankings/gini-coefficient-by-country(accessed 19/07/2021)

[ii] https://businesstech.co.za/news/government/421424/south-africa-crime-stats-2020-everything-you-need-to-know/(accessed 19/07/2021)

[iii] https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/bulletins/crimeinenglandandwales/yearendingmarch2021(accessed 19/07/2021)

[iv] https://www.saps.gov.za/services/october_to_december_2020_21_crimestats.pdf(accessed 19/07/2021)

[v] https://www.gov.uk/terrorism-national-emergency(accessed 19/07/2021)

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[vi] https://www.itf-oecd.org/sites/default/files/south-africa-road-safety.pdf(accessed 19/07/2021)

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[vii] https://www.plumplot.co.uk/Leeds-violent-crime-statistics.html (accessed 19/07/2021)

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