A story of Business Risk!

So once upon a time when I was a young man I worked for a very successful business, flash offices, helicopter, flagpole etc - it was a great place to work and I learned a lot.

But gradually things changed.

The business was and remained dependent on the technology of one major supplier,  there is nothing wrong with that many would argue - but it does represent a risk.

So if the business was dependent upon 1 major supplier you would have thought that major supplier would have been treated with respect and cultivated and cared for in the way you might care for anyone in a mutually beneficial relationship. But that was not the case.

Recognising this,  the business tried to de-risk this by creating complimentary products and services and complimentary suppliers, but unfortunately at the same time aggravating the supplier upon which the business depended.

In effect the business sat on a one-legged stool and that leg was removed when the major supplier terminated the business relationship.

Ultimately this high-risk strategy led to the demise of a great business, so what lessons have I learnt from this and other subsequent experiences?

Treat your suppliers, customers and employees with equal respect, no one of them is more important than the others. The customer is always right they say, but without products or services to supply to your customers or people to service those customers - you will have no customers who can ‘always be right’.

Try to avoid reliance upon a single point of failure, consider your reliance on any one customer, any one employee, any one supplier or any one funder. All easier said than done when you are starting out but once your business is established these are risks that should be mitigated to avoid major problems.

Beware of Inertia, never rely on a Cash Cow and expect it to deliver forever, always be looking to the future for new products, services and opportunities, who can remember Blackberry, Kodak, Blockbusters and the other great companies that have become victims of inertia - one of the main reasons great companies fail. Ask yourself what percentage of our revenues last quarter came from products or services we have introduced in the last 3 years?

To start managing the risks to your business you must first identify them. Having done that then create a Risk Register and itemise the risks to the business by severity (red, amber, and green works well) add some narrative to each risk, likelihood, and possible outcome, and then what can you do to mitigate that risk and who is responsible within your team. It's not always possible to mitigate all risks to the business but being aware of them and discussing them does help.

Having created your Risk Register you should then review this regularly (once a month or once a quarter minimum) in your Management or Board meetings and take action as required then update your Risk Register.

The alternative when faced with business risk is to bury your head in the sand and that’s not a great way to survive and thrive!

We currently have a vacancy in one of our Yorkshire-based Pabasso – Peer Advisory Board Associates boards so if you would like to know more about how we at Pabasso – Peer Advisory Board Associates help leaders of established businesses progress through shared experiences, expertise, and support, please do not hesitate to get in touch. 

If you would like to know more about how we at Pabasso – Peer Advisory Board Associates help leaders of established businesses progress through shared experiences, expertise and support, please do not hesitate to get in touch.

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