The value chain of the organisation and its operations needed to be clearly understood.

risk management case study

The value chain was then narrowed down to identify the most immediate risks to the organisation, which included:

  • The location: The warehouse was in a non-industrial area in the middle of an open field that was prone to natural fires.

  •  Temperature control: Supplies, including food, medicine and building material, can be temperature sensitive. Since supplies were not stored according to their temperature requirements, they were deemed unusable.

  • Fire hazards: Exposed wiring around cardboard boxes, as well as a lack of fire extinguishers, made the warehouse vulnerable to fire.

  • Incorrect storage: Supplies were stacked too high – making it hazardous to reach – and too tightly – making some supplies difficult to find when needed.
  • No disposal process: Due to inadequate storage, some supplies expired before they could be distributed. Once expired, there was no clear disposal process in place. This meant that expired supplies were taking up paid-for storage space and could incur an insurance premium, even though they were no longer assets.

If this were a commercial operation, the warehouse would not be allowed to operate in this manner. Guidelines were needed on location and building structure requirements, occupational health and safety standards, and an effective supply chain management process; all underpinned by a commercial insurance policy.

In this case the NPO may have considered itself as an aid organisation only, as opposed to acknowledging the needs of its core operating model as a warehousing and distribution organisation. Total losses could be calculated monetarily, as well as in social impact terms, since fewer people were served due to operational inefficiencies.

Once the organisation had reviewed its value chain and conducted a detailed risk assessment, it needed to interrogate how it could do things differently. The organisation also needed to be clear on the extent to which it would be able to absorb the potential fallout from the risks, if they occurred, and needed to engage the financial services sector to find the most appropriate vehicle for risk transfer.


Tags: philanthropy Practical Resources Trialogue Business in Society Handbook

About Trialogue

Trialogue is one of only a few consultancies in South Africa that focus exclusively on corporate responsibility issues. Over 17 years of experience puts us at the forefront of new developments in sustainability and corporate social investment (CSI).

We are a 51% black-owned company and the southern African Local Authority of the CECP Global Exchange.