Our risks and opportunities
Our robust risk management approach supports our strategy’s implementation and enables us to identify opportunities.
AfroCentric’s risk management is overseen by the Board and its sub-committees and managed by governance structures. These structures are chaired by senior management team members and are accountable to Board sub-committees. Risk management processes are effectively governed and managed by the Group risk management function.
We strive to mitigate risks and identify opportunities with our robust risk management processes.
Enterprise risk management (ERM) framework
AfroCentric’s ERM framework is aligned with King IVTM principles, the Committee of Sponsoring Organisations of the Treadway Commission’s ERM framework, and the International Organization for Standardization (ISO) 31000:2018 risk management framework. The ERM framework provides a structured and systematic enterprise-wide approach to risks within the Group.
We gain insight into our risk landscape by considering external and internal factors that could positively or negatively influence our strategic objectives.
Strategic risks are identified at Group level and cascaded down to business units, which identify operational risks through their respective risk registers.
IT, cybersecurity, economic/growth, people, regulatory and compliance, financial, legal, and internal and external fraud risks and opportunities are identified.
The Group assesses the likelihood of the risks in the absence of controls and provides a inherent risk rating. The Group has Board-approved risk quantification levels to measure the potential impact of risks.
The risk management system is regularly assessed by the Group, which implements internal controls for each risk.
Each residual risk is categorised as high, medium or low impact.
The Board approves the risk management policy and framework. The Risk Appetite and Tolerance Framework is also defined and approved by the Board.
Reporting, communication and consultation
The Board and senior management receive regular reports on the risk profile.
Training promotes risk management across the Group.
Monitoring and reviewing risks
We consistently monitor ERM and regularly conduct comprehensive risk assessments.
Overview of our top risks and related opportunities
Please see our material matter discussion for information on how our top risks are integrated into our materiality process.
Trend improving
Remains unchanged
Trend worsening
1. Concentration risk
Impact on value creation/preservation and potential for value erosion
A significant portion of our Group income is associated with a few key clients. While this focus has been beneficial, it also presents a potential risk to income stability if these clients were to face challenges.
Response and mitigating actions to preserve value:
- Facilitate the development of a unified open-market medical scheme that aligns with AfroCentric and Sanlam’s integrated brand and value proposition
- Invest in the growth of primary health insurance
- Intensify revenue diversification by expanding all subsidiary businesses
- Refocus growth efforts to mitigate geographic and political risk
Identified opportunities to create value:
- Unlock new revenue potential: By fully capitalising on the growth of primary health insurance, we can explore innovative product offerings and expand into untapped markets
- Expand our market footprint: Diversifying into new regions and businesses not only mitigates risk but also positions us to seize emerging opportunities in less saturated markets
- Enhance organisational resilience: Focusing on geographic and political diversification helps us build a more resilient business model that can adapt to global and regional shifts
- Launching a Sanlam-endorsed open scheme
Board committees overseeing the risk
ARC, IC
Affected strategic priorities
2. Profit and earnings optimisation
Impact on value creation/preservation and potential for value erosion
Maintaining our ability to meet budget and growth targets in headline earnings is crucial for preserving investor confidence and ensuring we can continue to reinvest in strategic initiatives that drive long-term growth and value creation.
Response and mitigating actions to preserve value:
- Monitoring of the Group’s performance against the budget and/or forecast
- Quarterly and annual review by the Investment Committee of the Group’s performance
- Monthly review of the results by the Group Executive Committee
- Quarterly reviews of the Group results by the Board
Identified opportunities to create value:
- Identify and capitalise on growth opportunities through regular financial reviews: Use insights from frequent assessments to drive growth and improve performance
- Optimise budget allocations and financial efficiency through performance monitoring: Apply data-driven insights to strategically adjust budgets for maximum efficiency
- Realign strategic priorities during quarterly and annual reviews: Use these reviews to refine our strategic direction and support sustainable growth
Board/Management committee overseeing the risk
ARC, IC
Affected strategic priorities
3. Strategic stakeholder engagement
Impact on value creation/preservation and potential for value erosion
Failure to proactively communicate and manage issues or risks with key stakeholders could lead to misaligned expectations, reputational damage, and erosion of trust, leading to value erosion.
Response and mitigating actions to preserve value:
- Implementation of a comprehensive stakeholder engagement plan
- Ongoing monitoring and reporting of service level agreements
- Regular and transparent engagement with stakeholders to ensure alignment and manage expectations
Identified opportunities to create value:
- Strengthen relationships with stakeholders through proactive communication: Reinforce our reputation as a trusted partner by anticipating concerns and engaging transparently
- Build trust and loyalty by exceeding expectations: Transform stakeholders into advocates by consistently surpassing their expectations
Board committees overseeing the risk
ARC, SEC
Affected strategic priorities
4. Cybersecurity vulnerabilities
Impact on value creation/preservation and potential for value erosion
The growing threat of cybercrime poses a significant risk to the organisation’s ability to protect critical systems and data from malicious attacks. If not effectively managed, the impact of cybercrime could lead to disruptions, data breaches, and reputational damage, potentially resulting in value erosion.
Response and mitigating actions to preserve value:
- Conduct regular evaluations, including cloud environments, third-party assessments, and compliance reviews across all subsidiaries
- Align with Sanlam’s cybersecurity framework and standards to ensure comprehensive protection and reduce exposure to risks
Identified opportunities to create value:
- Drive innovation through secure practices: Incorporating cybersecurity into all projects promotes a culture of security-first innovation, positioning the organisation as a leader in secure digital transformation
Board committees overseeing the risk
ARC, ICT
Affected strategic priorities
5. System stability and availability
Impact on value creation/preservation and potential for value erosion
Unreliability of critical IT systems poses a significant risk to business continuity, potentially leading to operational disruptions, decreased productivity, and reputational damage.
Response and mitigating actions to preserve value:
- Remediate outdated or unsupported hardware and software
- In the process of transitioning AfroCentric’s data centres to Sanlam’s infrastructure to enhance operational efficiency and leverage shared resources
Identified opportunities to create value:
- Enhance business continuity: Strengthen operational resilience by upgrading and maintaining IT systems, ensuring continuous availability
- Optimise IT performance: Address system stability proactively, reducing the risk of disruptions and enhancing overall productivity
Board committees overseeing the risk
ARC, ICT
Affected strategic priorities
6. Strategic execution risk
Impact on value creation/preservation and potential for value erosion
The Sanlam/AfroCentric integration presents significant opportunities for growth and value creation. However, the process also carries potential risks, particularly to our reputation and growth prospects, if not executed effectively. Failure to manage these risks could impact our ability to fully realise the strategic benefits of the integration and preserve long-term value.
Response and mitigating actions to preserve value:
- Performance tracking and monitoring are ongoing to ensure that the integration delivers the expected outcomes
Identified opportunities to create value:
- Drive strategic alignment and operational synergy: Through a honed focus on integration, we enhance our ability to execute on strategic priorities and realise long-term value
- Advance continuous value creation: Leveraging performance monitoring, we can ensure ongoing optimisation of the integration process, driving sustained value and growth
Board committees overseeing the risk
ARC, ICT
Affected strategic priorities
7. IT infrastructure
Impact on value creation/preservation and potential for value erosion
Obsolete and legacy IT infrastructure that has reached the end of life and is no longer supported presents significant risks to business continuity.
Response and mitigating actions to preserve value:
- Implement robust infrastructure upgrades
- In the process of transitioning the AfroCentric data centre to Sanlam’s infrastructure to enhance operational efficiencies and align with Group-wide IT strategies
- Optimised connectivity services by integrating with Sanlam’s provider, ensuring improved reliability and streamlined collaboration across the Group
Identified opportunities to create value:
- Enhance IT infrastructure: By successfully completing the migration and upgrades, we lay the foundation for a more robust, scalable, and efficient IT environment
- Strengthen organisational resilience: Leveraging the new data centre and updated infrastructure reduces the risk of future disruptions and positions us to better handle IT challenges
Board committees overseeing the risk
ARC, ICT
Affected strategic priorities
8. Reputation and conduct risks
Impact on value creation/preservation and potential for value erosion
Maintaining trust and ethical integrity is critical to the Group’s success. Challenges such as the potential for unethical disclosure of sensitive information or inadequate management of conflicts of interest could affect stakeholder confidence and organisational reputation, posing risks to value preservation if not managed effectively.
Response and mitigating actions to preserve value:
- Strengthen governance frameworks and ethical guidelines to ensure alignment with the Group’s core values and Code of Ethical Conduct
- Launch initiatives to raise awareness, including targeted fraud prevention campaigns and updates to key policies, such as recruitment practices and restraints of trade
- Increase focus on consequence management and expanded risk and compliance capacity under the leadership of the CFO
Identified opportunities to create value:
- Strengthen stakeholder trust: Fostering a culture of accountability and ethical leadership builds confidence and supports sustainable relationships
- Enhance organisational resilience: Improving data security and governance frameworks positions the Group as a forward-thinking and adaptable organisation
- Drive operational efficiencies: Aligning risk, compliance, and IT functions streamlines processes and ensures long-term value creation
Board committees overseeing the risk
SEC, ARC, ICT
Affected strategic priorities
9. Membership
Impact on value creation/preservation and potential for value erosion
Economic challenges like poor growth, job losses, inflation, and rising interest rates are straining disposable income, risking membership stability and potential value erosion. However, strategic actions focused on cost control, enhanced services, and targeted growth can preserve and even create value amid these pressures.
Response and mitigating actions to preserve value:
- Implement cost control measures while driving growth in schemes, primary health insurance, and the pharmaceutical cluster
- Balance growth and cost elements across the Group to ensure financial stability
- Design and refine product benefits to better meet member needs
- Enhance client experience and intermediary support by improving onboarding and servicing processes
Identified opportunities to create value:
- Leverage growth in key areas: Despite challenges, steady membership growth in certain segments presents opportunities to strengthen the revenue base and expand services
- Restructure and adapt: Strategic adjustments and service enhancements in response to shifts in client needs can lead to improved retention and new growth avenues
- Expand service offerings: Adding new services and digital solutions provides potential for additional revenue streams and enhances the organisation’s overall value proposition
Board committees overseeing the risk
ARC
Affected strategic priorities
10. Technology integration risks
Impact on value creation/preservation and potential for value erosion
Integration of AfroTech and Sanlam Corporate Technology introduces potential operational and people-related risks, including staff uncertainty, which may impact organisational morale and operational continuity if not effectively managed.
Response and mitigating actions to preserve value:
- Implement robust leadership oversight from both Sanlam and AfroCentric Group to ensure a smooth integration process
- Second key personnel from Sanlam to oversee AfroTech’s critical processes and maintain operational integrity
- Engage with staff and unions to foster collaboration and address concerns proactively
Identified opportunities to create value:
- Strengthen organisational alignment: Successful integration enhances collaboration and operational synergies across the Group
- Support workforce stability: Proactive engagement with staff and unions builds trust and minimises uncertainty during transitions
- Enhance operational continuity: Leadership oversight and strategic secondments ensure seamless integration and support long-term success
Board committees overseeing the risk
ARC
Affected strategic priorities
