Risk

Keeping with the 12 Days of Christmas - Each day I am going to make you think about your business and todays challenge is to consider - RISK.

This is taken from new book "The Business Roadmap - 30 Essential steps"

For businesses operating prior to 2020, the concept of risk assessment is likely to be painfully familiar. With lockdowns and the COVID-19 pandemic, every business faced unprecedented challenges and had to assess very quickly how to operate under new and very difficult conditions.

Regrettably, many businesses did not survive the two years following COVID-19, falling victim to the pandemic's impact. Factors such as losing major clients, running out of cash, losing key employees, and the closure of critical suppliers all contributed to their demise. Regardless of the specific circumstances, the pandemic exposed pre-existing vulnerabilities within these businesses.

The purpose of this book is precisely to address this issue by enabling business owners to examine key elements of their business operation and uncover potential risks lurking within, together with the actions necessary to address such risks. Alternatively, if risks are deemed minimal, a proactive stance can be adopted to monitor the risks regularly. This approach ensures readiness to respond effectively should the need arise, thereby enhancing the business's resilience in the face of unwelcome challenges.

Coming back to the unprecedented nature of the pandemic and how it exposed vulnerabilities that even well-prepared businesses had not fully accounted for, we have the benefit of hindsight allowing us to look at what the core factors were, so that lessons learnt are now lessons shared. Factors contributing to these downfalls included:

Internal Assets: The absence of the business owner or another essential employee for an extended period:

·???????? Ensure that all critical tasks have more than one person trained and capable of performing them.

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External Assets: Overreliance on external parties crucial to achieving business objectives:

·???????? Dependency on a small number of customers for a significant portion of revenue. Too much reliance on a few customers can lead to a substantial revenue decline even if only one key customer is lost, causing a critical impact on the business.

·???????? Dependency on key suppliers remaining in operation. Avoid being overly reliant on suppliers who have significant control over pricing or whose downturn could disrupt your supply chain. Ensuring alternative sourcing options or contingency plans is vital.

·???????? Business partnerships built solely on personal relationships without formal documentation. Agreements based on handshakes or verbal assurances can be fragile and prone to breakdowns. Formalise partnerships with documented agreements to avoid potential conflicts or misunderstandings.

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Supply: Reliance on continued supply of critical components or material.

·???????? Shortages in supply often result in increased prices. Assess whether your business can withstand a price war or if you would become uncompetitive.

·???????? Similarly, sudden spikes in energy or fuel prices can escalate costs for many businesses. Those with robust risk management strategies may remain competitive, while others might struggle to absorb increased expenses, impacting their competitiveness.

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Working Conditions: Adaptability of operations to changes in the working environment:

·???????? Forced relocation from your current premises. Consider whether your business can seamlessly transition to a new location without significant disruption to operations.

·???????? Increased demand for flexible work arrangements. Assess the feasibility of implementing work-from-home practices. Ensure tasks that were previously performed only in the office can be efficiently carried out remotely.

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Managing a crisis in the heat of the moment can lead to impulsive decisions and increased risk-taking. By proactively considering various scenarios and their potential impacts, business owners can develop contingency plans to address a crisis before it arises.

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Risk management is not solely about addressing negative occurrences; it is also about navigating the challenges that come with success. Businesses can also falter when they experience rapid growth, and managing this growth effectively is essential.

Here are some key aspects to consider in managing the risks associated with rapid success:

·???????? Managing Customer Expectations: Ensuring that the quality of products or services meets or exceeds customer expectations, even during periods of high demand, is vital for maintaining customer satisfaction and loyalty.

·???????? Managing Suppliers: Establishing strong relationships with reliable suppliers and ensuring a steady supply chain is key to meeting increasing demand without compromising quality or delivery times.

·???????? Maintaining a Healthy Cash Flow: Balancing the outflow of funds with incoming revenue is critical to sustain operations and support growth initiatives. Managing expenses, collecting receivables promptly, and strategic financial planning are key components of maintaining a healthy cash flow.

·???????? Investment in People: As demand grows, investing in hiring and training skilled employees becomes key to meeting customer needs effectively. Building a capable and motivated team is really important for sustaining business success in the long run.

·???????? Infrastructure and Equipment: Scaling up operations to accommodate increased demand requires adequate infrastructure and equipment. Ensuring that your business has the necessary tools and resources to keep up with growing demand is essential for maintaining efficiency and productivity.

www.thebusinessroadmap.co.uk