How do you deal with uncertainty and risk in your Business Plan?

Consider completing a Failure Mode & Effect Analysis (FMEA) on your key and critical processes. This tool will help you understand what risks exists, the potential magnitude of the risk and the likelihood of it occurring. Anticipate undesirable outcomes and plan for how you can prevent, mitigate and or respond to them. @Matt Rebeiro - Challenge the Status Quo #BPM #process #FMEA #LSS #LeanSixSigma

May suggest that there are many degrees of risk. I believe the one you're referring to is "predicting the unpredictable". The others are much easier to find the categories using the PESTEL model. To predict the risk of the unpredictable requires that you reach outside of your team to what many refer to as the "RED" team. These are individuals that review and participate as an outside contributor that have no stake but the success. Outside your team actually means "outside". Perhaps someone from the space program, global financiers, or professional diplomats and political scientist. One successful discussion I incurred was a briefing with the BoD's advisory team. These individuals were chosen for their expertise and knowledge.

In addition to fantastic set of tools listed (SWOT, PESTLE, scenario planning), using Porter's 5 Forces analysis provides a framework to ask questions and look at the potential of risks from different perspectives including your customers, competitors, vendors.

A crucial step in planning is differentiating between risks and facts. Risks are uncertain events with a potential negative impact. They typically have a medium or low probability of occurring, and you can take steps to mitigate them. Facts, on the other hand, are established truths or conditions you can rely on. If something has a high probability of happening, it's not a risk anymore; it's a reality you need to factor into your plan. By identifying these "facts," you can develop more realistic and actionable plans.

Risk is a natural part of any business environment. Embrace it. You won't get ahead by ignoring your potential challenges. You must be proactive.

Prioritizing and categorizing uncertainties and risks is crucial for effective business planning. ?? Tools like risk matrices, registers, and maps not only help in ranking risks but also in visualizing their potential impact. This structured approach ensures that you focus your resources on the most critical issues, enabling proactive rather than reactive management. ?? Remember, a well-prioritized risk management plan is your safety net in navigating the unpredictable business landscape. ??

One of the go-to tools I have used for years in this type of issue is to formalize a "pareto" graph that visualizes the top driver of the issue or quality driver or complaint category...whatever you want to slice, that simplifies the "what is the biggest thing to go after" and then that will lend to an easy "do we have the means to tackle that issue now or not?" conversation. By having a straight-forward and data driven way of prioritizing options, this helps drive quicker conversations to action

In business process improvement, addressing uncertainty and risk involves a combination of strategic planning, scenario analysis, and risk mitigation techniques. One approach is to conduct thorough risk assessments to identify potential threats and their impact on operations. Utilizing techniques such as SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can help in understanding both internal and external factors affecting the business. Additionally, implementing agile methodologies allows for flexibility and adaptability in response to unforeseen challenges. Continuous monitoring and feedback loops enable timely adjustments to the business plan, ensuring resilience in the face of uncertainty. Thanks.

No organization has infinite means to resource all risk mitigations at once, so risk owners inflate their risk to acquire limited funds and FTEs. External Auditors and Compliance Organizations also see their “findings” as THE most important item to be addressed. Use tools like FMEA to rank the risks and challenge the assessments to assure they are normalized and not inflated.

Once you've identified uncertainties and risks, the next step is to prioritize and categorize them based on their likelihood and severity. Use tools such as: Risk Matrix: Assesses risks by plotting their likelihood against their impact, helping to prioritize which risks need immediate attention. Risk Register: Documents identified risks, their impact, likelihood, and mitigation strategies, providing a comprehensive view. Risk Map: Visualizes risks according to their severity and probability, aiding in the categorization and focus on critical issues. These tools help rank and classify uncertainties and risks, allowing you to concentrate on the most significant and urgent issues that need action.

Identifying and understanding risks is one thing, but knowing what to do is something else entirely! Whether using PESTLE, SWOT, or some other tool in your toolkit, have an awareness and understanding of what to do if and when something goes awry. Things will go wrong, but having a plan will always soften the impact and allow the team to adjust and get back on track sooner than later.

Once risks are prioritized, develop and implement both mitigation and contingency plans. Mitigation Plans aim to reduce the likelihood or impact of risks, such as diversifying income sources or enhancing quality control. Contingency Plans outline responses if risks occur, like reallocating resources or adjusting timelines. Use tools like: Action Plan: Details steps and resources for risk mitigation. Risk Response Plan: Defines specific responses for each risk. Business Continuity Plan: Ensures operations continue during disruptions. These plans help address risks proactively and reactively, ensuring resilience against potential issues.

To handle risks, create clear plans to reduce or manage them. Develop mitigation strategies to address potential issues before they arise, and have contingency plans ready in case things don’t go as expected. Implement these plans and keep an eye on how they’re working, making adjustments as needed.

This step involves regularly monitoring and reviewing uncertainties and risks, updating your business plan as needed. Since uncertainties and risks are dynamic, you must track their status, assess the effectiveness of your mitigation strategies, and identify new or emerging risks. Use tools like: Dashboard: Provides real-time data on risk status and metrics. Risk Report: Summarizes the current state of risks and mitigation efforts. Feedback Loop: Collects input from stakeholders to refine risk management strategies. These tools help keep your risk management up-to-date and ensure effective communication with stakeholders.

Keep a close watch on uncertainties and risks by regularly reviewing them. Track changes and updates, and assess how well your plans are working. This ongoing monitoring helps you stay prepared and make timely adjustments to keep things on track.

The pandemic's necessity for pivoting provided profound insights into the resilience of companies and their personnel, highlighting the unpredictable nature of the future. Embracing uncertainties and risks as catalysts for growth and innovation is imperative in business. By capitalizing on lessons learned, integrating best practices, and employing continuous improvement strategies, organizations can convert challenges into invaluable insights, strengthen their core competencies, and enhance their business strategies for heightened resilience and success.

The fifth step is to learn from and improve based on the uncertainties and risks you've encountered. Risks can reveal strengths and weaknesses, expose gaps, and spark innovation. Use tools like: Lessons Learned: Document insights and experiences to guide future actions. Best Practices: Apply successful strategies and approaches identified during risk management. Continuous Improvement: Implement ongoing enhancements based on risk evaluations and feedback. These tools help you turn challenges into opportunities for growth, refining your business plan and boosting resilience.

Use experiences with uncertainties and risks as learning opportunities. Analyze what worked and what didn’t, and apply those lessons to future plans. This approach helps you continuously improve and become more resilient to potential challenges.

A comprehensive approach is required to effectively manage uncertainty and risk in a business plan. The importance of identifying and assessing uncertainties and risks, prioritizing them based on likelihood and severity, implementing mitigation and contingency plans, regularly monitoring and reviewing progress, and fostering an innovation and learning culture is emphasized in the literature. I encountered numerous uncertainties while working in the aerospace component manufacturing industry, such as supply chain disruptions and design modifications, as well as risks such as quality defects and production delays. Utilizing comprehensive risk management strategies was critical to effectively mitigating these challenges.

- Realize that you can never avoid risk - you can only estimate, strategize, and move forward with an acceptable degree of risk. This is an essential switch in mindset for many people, especially those who have yet to work in strategy or own a business. - Secondly, realize that not all risks are bad. The definition of good or bad depends on your risk-reward ratio and how well your risk management plan is structured and executed at critical times. - If there is no risk, there will be no growth. Your business has reached maturity. If your strategy is not defensive but innovative or transformative, embrace risk. - Turn risk into growth and opportunities. The sooner you embrace these facts, the sooner your business will thrive.

Embracing uncertainty and risk can actually benefit your business. By accepting that risks are part of the process, you can plan for them and stay flexible. This mindset helps you adapt more easily and seize opportunities that others might shy away from.

It’s risky to deal with risk alone. The challenge is having a fixated view, single perspective and limited information to make decision. Work out the approach with a good mix of cross functional members, talk to the stakeholders to gather their opinions on the risk, open to news from the region/sector that might have direct or indirect impact to your risk. Ensure that the Risk Register are updated and the historical information kept for the other teams to get access and learn from the success or mistakes. Perform AAR to determine why the approach is successful or failed and determine how can the organisation do better, improve the approach continuously.

- Calculating and managing risk can be psychologically tricky. Your plan can be mathematically and statistically correct, but your emotions will ruin your risk control at critical times. - To minimize emotion, you need a team—not just any team, but a team of individuals who have a growth mindset, understand that risk is a part of the equation, embrace it, and are willing to pivot and change plans. This is especially important for businesses in the introduction and growth phases. - A bold, agile, and flexible team will enable you to minimize panic and excessive processes during challenging times. - Be transparent when communicating your risk and situation. Combining this factor with the right team, your chance of success will be higher.

When dealing with uncertainty and risk, it’s also useful to build a culture of openness and adaptability in your team. Encourage open discussions about potential issues and create an environment where team members feel comfortable sharing concerns and ideas. This not only helps in spotting risks early but also fosters innovative solutions and strengthens your overall strategy.