Business situations you can’t control (but learning from it will be wisdom to you)

There are things that can happen and will happen regardless of how much we plan for it. And of course, here we are more concern about the negatives (risk) than the positives (windfall) that affect our business. This is not surprising as we indeed live in a volatile, uncertain, complex, and ambiguous world.

As wise as we can be, we would like to anticipate and plan for the negatives. But the fact remains, no matter what, something we did not plan for, happens.

Having say this, it does not mean that we should not plan at all. While no one can anticipate every negative event, as prudence calls for, we should do and take the necessary steps to anticipate, prevent of transfer the potential risk out. In fact effective scenarios planning with strong analytics becomes even more vital.

While we cannot always control the potential negatives, we can learn from it to be wiser and be more aware the next time. This is part of building resilience in risk management.

Now, what are the typical and possible situations that can affect your business and financial plan? What can be the possible takeaways that you can learn from it? Here are a few common but very important ones;

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?1.?Misreading marketplace – Marketplace do change and perhaps the timing of what you plan for may not be right. You may be too early for your products and services offerings. Hence it is important to connect with Key Opinion Leaders on their thoughts and consumer readiness during planning stage.

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2. Economic changes – Many unforeseen events can suddenly happen. Beside significant external events, these changes can also be due to conflicting or biasness in the reporting. Therefore, it is important to conduct deep scenarios planning and connect with more than one source for verification purposes. Do not take what you read at face value.

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3.?Financial problems – Due to changes in consumers’ living there may be situations that impact to their lives e.g., a sudden major financial hiccups that was unplanned or unexpected. So, on your end, it is prudent always to be cautiously optimism in any business projection. Otherwise you may end up with a significant inventory or in a very costly legal tussle from prior commitment.

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4.?Consumers’ changes – Fierce competition are always pushing out new and more enticing offerings to consumers. Today it is not easy to secure customers’ loyalty. For this reason, it is best to exclude consumers’ loyalty into your planning. Take it as a bonus if it happens.

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5.?Loss of talents – This is one of the major challenges to any business. Human talents are the most difficult to manage for there are far too many factors that can affect their staying power. As much as possible, automate task and simplify task so that it is easy to learn if some else need to cover any talent loss.

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6.?Errors in diversification – Sometimes diversification into unfamiliar market can be of high risk. Being too eager to diversify can lead you into such risk. The point to learn is always use facts in your decision making and seek group opinion on readiness to avoid biasness.

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7.?Under-capitalized – This is one of the most common and fatal mistakes that a business can encounter. The lack of financial acumen to understand the many factors that can affect the overall financial capability and well-being can bring a business to a halt. No business can survive without a well-thought-out financial plan, so make sure you have a solid plan.

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8.?No planning – This is probably one of the worst cases of how businesses get into trouble. Without planning, there is no goal, no direction, and no clarity. Such risk should not have happened if only management take steps to conduct a proper business planning.

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9.?Political changes – There will always be such risk whether in the home country or abroad and it can be direct risk or resulted from third-party risk. Use diversification strategy and do not place all your eggs into the same basket.

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Having learnt of the above, you can include them into your scenario planning for different timeline from immediate, short-term, mid-term and long-term. You then apply the degree to what is Possible (something that exists and may or may not be proven), Plausible (something that is reasonable or valid) or Probable (something could happen but until now it has not been proved) to each scenario. A dynamic scenario planning that fully incorporates all impact levers will help you to flag out the likelihood of those events that may adversely impact your business. And this is a very worthwhile planning no business can afford to do without.?