The main purpose of risk management is to adequately position the organisation to understand and respond to potential risks and opportunities that could materially impact the execution of our strategy and our ability to create value.
Our primary risks and opportunities are identified within the context of our strategy to proactively respond to ever-changing internal and external operating environments. We continue to ensure that we strengthen the link between our strategy and the risks and opportunities by applying our Enterprise-Wide Risk Management (ERM) process in the context of our key business requisites.
In pursuing our goals towards creating, preserving and realising value for our stakeholders, within our ERM Framework, we aim to proactively manage risks and opportunities in a dynamic operating context. Our ERM process ensures the adequacy, appropriateness and effectiveness of our responses, mitigating potential significant negative business impacts in order to deliver on our business targets.
Since the majority of Blue Label’s inventory is of a virtual nature, defence against cybercrime will remain a top priority as cyber-attacks can lead to reputational damage, business disruption and ultimately loss of revenue.
Blue Label is dependent on the systems and platforms that enable its products and services on which it manages its merchant base. Blue Label’s technology spend has increased in recent years in support of its importance to both organic and inorganic growth, as well as simultaneously to improve system availability and resilience as the volumes of both the number and types of transactions increase.
Strategic responses and mitigating measures
Unfavourable economic conditions and heightened inflation are negatively impacting consumers’ disposable income. Consumers are forced to prioritise their buying habits based on needs, leaving less or no disposable income to buy products that are discretionary (e.g., gaming products, events tickets). Consumers are under pressure, and they are looking at alternate sources of power such as gas and paraffin and thus moving away from our traditional core offerings, including especially pre-paid electricity products.
Strategic responses and mitigating measures
Power outages on a national scale have ramped up significantly in the last six months of FY23.
Electrical power is an essential input in all modern-day economies. A large part of Blue Label’s business is the vending of airtime and electricity products. The power crisis has had a two-fold impact in our business; namely, many of our merchants do not have back-up power resources to continue to vend during power outages, and secondly, consumers no longer buy products at the same level due to the lack of electricity/back-up resources in their domestic environment.
At a Head Office level erratic electricity supply results in increased running costs. Resources have to be allocated to back-up generators, an expensive alternative to grid electricity, which has had a direct impact on profitability and carbon emissions.
Strategic responses and mitigating measures
The failure of Cell C’s strategy and execution of its business plan would not only negatively impact the investment therein, but would also have a compounded effect on the Blue Label Group, in that a significant portion of its profitability stems from its trading relationship with Cell C.
Strategic responses and mitigating measures
Lack of, or insufficient capital investment to meet customer service and support capabilities. Lack of innovation places risk on the sustainability of the business. BLD has experienced a shift from a ratio of 50:50 in terms of volume distributed between physical and digital product supply to a 3:1 ratio in favour of digital distribution.
Failure to continue on this digital migration will result in Blue Label being disintermediated as a result of consumer behaviour.
A further focus area for improvement is our customer service channels as it too is still very traditional.
Furthermore, by limiting our printing of paper vouchers, we are ultimately reducing our carbon and environmental footprint going forward.
Strategic responses and mitigating measures
Risk of inadequate management of third parties in the Blue Label value chain introduces further risks such as cybersecurity, financial, compliance, reputational and operational risk to Blue Label.
Strategic responses and mitigating measures
Due to the nature of our digital inventory, Blue Label is vulnerable to fraudulent activities.
Blue Label maintains zero tolerance for fraud and irregularities. All incidents are investigated, irrespective of the size or value.
The ongoing roll-out of new products/solutions increases the exposure to potential fraud-related activities.
E-tokens are a form of electronic cash utilised for secure transactions. Blue Label relies on the high-volume, low-margin distribution and sale of e-tokens of value. Blue Label, therefore, needs to protect its virtual stock from theft, the corruption of voucher pins and cybercrime.
Strategic responses and mitigating measures
Business Continuity Plans (BCPs) and Disaster Recovery Plans (DRPs) ensure that the business is prepared for severe interruptions and that business processes continue with minimum downtime during cases of emergency or disaster.
If the BCPs are misinterpreted or not properly in place, the potential breakdown of critical business processes could harm Blue Label’s profitability and reputation.
Strategic responses and mitigating measures
Certain prominent financial institutions and retailers rely on Blue Label to process their substantial transaction volumes. A lapse in Blue Label’s service delivery to these stakeholders could result in a major negative impact on its profitability and/or reputation.
Strategic responses and mitigating measures
A significant proportion of our population is underserved in their ability to access formal financial services. Following the significant increase in access to cellular phones and data we are able to provide consumers and informal businesses access to low-cost digital means of e-commerce transactions. This connects businesses with consumers to transact in a more convenient and efficient manner as well as enabling informal businesses to cost-effectively leverage off digital e-commerce trading platforms.
Strategic responses and mitigating measures
Blue Label has an opportunity to play a role in climate change mitigation both in terms of its own carbon footprint efficiency and decarbonising the supply chain for products and services that are digitally distributed.
Strategic responses and mitigating measures
Blue Label Telecoms Integrated Annual Report 2023
