In this business we ask ‘what if….?’ quite a lot – in every risk assessment, every emergency action plan – and we can apply the same thinking to our organisations. The process of strategic risk assessment is a vital health check for a company and can highlight areas where the organisation is dependent on certain factors.
We start by asking ‘what’s the worst that could happen?’ and by exploring some potential future scenarios, we start to identify the key risks that could jeopardise the existence and success of the organisation. It can be a challenging process and can uncover issues and challenges that haven’t been considered previously.
One of the major challenges is considering the key people that the organisation is dependent upon for its success. This group may include clients, suppliers and staff and the organisation needs to understand how manageable that dependency is. If the company is dependent on one client for over 50% of its turnover, then what happens if that client contract ceases? Perhaps the portfolio needs to be revisited and new projects sought to ensure that the pipeline of work keeps moving and dependency is reduced.
It may be that the company is dependent on one or two key members of staff for managing the organisation (and avoiding some of the financial or operational risks) as much as for producing the company output. It may be that the company is built on the skills, ability and personality of the chief executive or other key individual and so there is a risk that the company’s capacity is therefore limited by the individual, meaning that the
company simply cannot grow. Let alone what happens if that key person can’t work for some reason.
For founder managers, it can be particularly difficult to critique how the company works and to plan for their succession. As much as we are taught that business is business, I would argue that it isn’t. It’s personal, particularly for entrepreneurs and small businesses. So in considering these big challenges for an organisation, we must consider the people affected by and involved in them and how we respond to those challenges also influences how we are perceived internally and externally.
There are some brilliant things we can do to mitigate these strategic risks. We can insure our key people in case of injury or similar. We can create delegation structures that share workload, information and responsibility as well as develop skill and capacity across the organisation. We can talk to other people and get support and advice from sources you trust and respect. For me, I do this by having a non-executive Board including a freelance Finance Director, all people who know a lot more than I and who I trust to advise in the best interests of the company. My Board is invaluable in assessing and managing these strategic risks, keeping me on track and enabling me to take all of those mitigating actions, enabling all of us to work to our best and enabling the company to succeed.
Claire Eason Bassett, Managing Director, Mackerel Sky