In these days of an increasing sense of urgency and
insecurity it can be quite comforting to remind oneself that despite everything
-
- Things are actually
quite good
- Our brains are hardwired for survival in a harsh environment, and we carry this instinct with us in business as well; 99% of scenarios we may worry about actually don't come to pass
- For the 1% of bad things that do occur, there is a potential remedy; taking action and being prepared!
- Our brains are hardwired for survival in a harsh environment, and we carry this instinct with us in business as well; 99% of scenarios we may worry about actually don't come to pass
- For the 1% of bad things that do occur, there is a potential remedy; taking action and being prepared!
Taking stock and inspiration from people who truly prepare
for the worst, we're talking zombie-apocalypses and breakdown of the world as
we know it - survivalists (preppers) - the catchphrase of the day is the headline of the post;
not scared, prepared!
That's great news - but how does one prepare for the
appropriate 1% of the perceived risks and threats?
There are a few factors which to a large extent -
considering the 80/20-rule - can mitigate practically any risk or negative
outcome, making the scenario-specific details (barring earth-shattering comets
and nuclear fallout) less risky.
Preparedness
- Risk inventory
- Risk inventory
Whether considering the risks from a gambling perspective
(there's always a 1/37 chance a bet on red or black will be very wrong ..), or
taking a purely financial analysis view (what is it worth to mitigate a 1% risk
of a 1M loss/cost? - or to mitigate a 99% risk of a 10k loss/cost?) of
different scenarios, the value and outcome lies very much in the process of the
work itself; putting in the effort and gathering the organizations thoughts on
where threats may lie. Similarly to e.g.
project planning, paraphrasing Moltke (the Elder) - "No plan survives contact with the enemy", the job isn't
done once the inventory, or project plan, is outlined and documented; it's the
activities and awareness its inception has triggered which carries the real
value, and when applied to reality, you need to adjust and amend the plan
(inventory) accordingly.
Entire books have been written on the subject of risk and
risk inventory so this won't be an attempt at summarizing the topic, but if you
haven't had a chance to read up just yet; try starting out with identifying the
categories and severity of risks which could affect your business, or
prerequisites - enablers - for your business.
External/Internal, Customer-related, competition/market,
regulation/legislation, production/input resources, financial/geopolitical,
media/CSR .. depending on your line of business and industry, the combination
of prioritized areas to consider varies.
When identified, it's useful to map the risks into a matrix with impact
& likelihood, and weigh in the financial cost to see the potential ROI for
what allowance can be made to fund avoidance/elimination of each risk.
Resilience
- Know your options, maintain alternative fall-back strategies
- Know your options, maintain alternative fall-back strategies
Apparently, we should expect a tire blowout every 100000 km
- but most of us are quite keen on making sure that the spare tyre is securely
in place for the 9999x km travelled on other occasions as well. You probably have a second alarm set in the
morning, just in case you snooze away the first wakeup call. We should take a similar view from a business
perspective. In short - try to find whichever 'single points of
failure'-factors you may be dependent on for your business, internally as well
as externally, and with the ROI view from the risk inventory; invest in and
allow for fall-back strategies when possible.
Some may even be cash-flow positive; bringing in a second
supplier of standardized parts for a subset of the overall materials sourcing
could trigger some healthy competition price-wise between the suppliers. Some may be simple; keeping a few printed
lists of employee phone #'s in case the AD needs to be recovered/rebuilt. Important to remember is of course
interdependencies between systems or business processes - and that the
end-to-end output is only as resilient as the weakest link it is dependent
on. With elevated levels of complexity
in larger organizations, this perspective needs to be encapsulated on a modular
level, by process, or department, or <insert appropriate viewpoint for your
business here>
Spread the risk
- hedge your bets
- hedge your bets
We're all acutely aware of the old proverb regarding too
many eggs in one basket - and the same principle applies to this context as
well. Easier said than done perhaps,
especially when growing your business organically from the ground up - but
keeping the risk/resilience-factor in mind when reviewing new business delivery
scenarios will have a healthy impact over time.
Even sharing business with partner companies in the industry, on a quid
pro quo basis, may be cost/revenue neutral whilst increasing resilience in
downturns for both companies.
Large, perhaps even multiple contracts with single Customers
can be a great opportunity to generate the margin to grow the business, and
shouldn't be devalued on the basis of risk vulnerability - but the steps taken
from that position should be in a direction which builds alternative revenue
sources. All good things ..
Hopefully a lot of this sounds like common sense, and is
already part of your governance efforts.
The trick to it, is to work consistently with these angles of your
business as they usually need to take a back-seat position in relation to the
pressing day-to-day issues and tasks of delivering the services and products to
your
Customer. Making it part of the
quarterly review or board reporting format, may be good placeholders to aim
for.
"The only thing
we have to fear is fear itself" (F. D. Roosevelt) - All risk carries
opportunity and reward, as long as it is managed!
By Fredric Travaglia, Business Development Consultant @ Enfo
Thank you for reading my post. At enfogroup.com , at thedigitaldimension.com and
at LinkedIn I regularly write about
change management, trends in technology and services. If you would like to
read my future posts then please click 'Follow' and feel free to also
connect.
http://www.travaglia.se/2016/06/id-like-two-scoops-of-change-please.html
http://www.travaglia.se/2016/10/peace-for-our-time.html
http://www.travaglia.se/2016/10/the-age-of-regulation.html
http://www.travaglia.se/2016/10/avoiding-great-extinction.html
https://en.wikipedia.org/wiki/Survivalism
http://www.travaglia.se/2015/10/who-is-your-customer.html
http://www.enfogroup.com/
http://www.thedigitaldimension.com/
http://www.linkedin.com/today/posts/fredrictravaglia
