THE RISK JIGSAW™ – WHAT IT IS AND THE IMPACT ON BUSINESS
Risk is an inherent element of the cost of doing business. The optimist will in fact tell you that the higher the risk, the higher the return!
So if we accept that you should not be in business if you do not want to take risks, what are these risks and how do we deal with them?
Risks are pervasive and differ from industry to industry. My specialty is tourism but my approach to risk expounded here would apply to all businesses and is therefore a useful generic guideline.
I will apply a concept I have devised to make risk identification and management easier to understand namely the ‘Critical Transactional Path’ (‘CTP’) i.e. each transaction, regardless of the industry, has a critical path be it documentary (paperwork) or physical (on site). So most business transactions will be initiated by some form of advertising, then a quote and concluded with an invoice and/or statement.
Along this path a variety of risks will be encountered and have to be dealt with or ignored – at the seller/supplier’s peril! These risks will arise from e.g. surrounding circumstances, common law and applicable legislation. There is of course a myriad of the latter so I will focus on the Consumer Protection Act, Act # of (‘CPA’) and the Protection of Personal Information Act, Act # of (‘POPI’ or more lately ‘POPIA’).
Details of the risks are not only important for the supplier but also for the consumer. The latter is now more protected than before due to the CPA & POPI, the former regarding details of the risk pertaining to the product sold and/or service provided and the latter regarding the protection and use of the consumer’s personal information.
The CPA and POPI apply to consumers who are natural persons as well as legal entities i.e. companies, close corporations, partnerships and trusts. The CPA is limited to legal entities with a turnover or asset value below R2 million per annum BUT there are a number of exceptions (i.e. the CPA applies regardless of turnover e.g. all franchisees and so-called ‘end-users’ who may well not be a party to the contract [e.g. T&C/Indemnity] are consumers regardless of turnover!) – there seems to be a general lack of awareness thereof and this could have serious liability implications.
The purpose of the CPA in this regard is to level the playing fields by requiring the supplier to bring all elements of risk to the attention of the consumer at the earliest possible opportunity so that the consumer can make an educated decision (‘receive and comprehend’) as to whether or not to continue with the purchase and/or activity. Accordingly the consumer must be advised at the earliest of the following (Section 49) – when the consumer (a) enters into the agreement; (b) starts engaging in the activity (e.g. riding a quad bike); (c) enters the facility (e.g. walks into the warehouse); (d) is required to make payment.
The manner in which the above is done is also prescribed, i.e. it must be in plain language, conspicuous and be ‘likely to attract the attention of an ordinarily alert consumer, having regard to the circumstances’
This overriding approach must be applied along the entire CTP which, in most cases in our modern society is a website, social media and advertising.
More about this and what to do in the next article
© ADV LOUIS NEL
MAY 07 2018
This newsletter/article is intended to provide a brief overview and is not intended as legal advice. As every situation depends on its own facts and circumstances, only professional advice should be relied on. Please contact Adv. Louis Nel at firstname.lastname@example.org,za or on +27 83 679 4556’