Businesses face all sorts of risk, but most can be mitigated with the availability of timely information. That’s all well and good, but what information and where do you find it.
The risks of technology are well documented — from viruses to hack attacks. Symantec’s Steve Martin says every business should have a plan to reduce the risk, based on a thorough analysis of technology and operations by an IT professional who can provide the right level of expertise — a bit of money spent now can save you a lot down the track.
Many risks though, are more to do with human nature than technology. Greg Stephens says many processes might have been set up to reduce risk, but standards drop over time and the increased risk goes unnoticed; for example, the bank that accepts a single signature on a cheque because the other signatory has left the company.
Then there’s white collar crime — which can be anything from embezzlement through to the disguising of performance figures to meet corporate bonuses.
Even the behaviour of your CEO, if left unchecked, can be a risk. Is the board really asking the right questions? Anil Makhija from the Ohio State University found a link between how much CEOs borrow on their house and how much they push for leveraging in the business they’re running — now that could be a worry!
Another question the board should be asking is about succession plans. The departure of senior executives can be a huge risk for any business, yet the issue is often ignored until it’s too late. Sue Forrester says the board needs to work with the CEO to make sure plans are in place to avoid such an eventuality.
The biggest risk for many businesses is cash flow. Slow payment by debtors is often a common reason for that. Mike Rich says this can be because of poor visibility of who owes what. A corporate dashboard, showing key information such as debtor days and serial bad debtors, can help free up some working capital. Without that information to hand a business can come unstuck, particularly in the quiet months. Mike Daniels says February and March are a bad time for insolvencies in Australia for companies who failed to consider cash flow over the summer months.
Then there are all the other external risks we have covered in other episodes of our Top 40 business tips — like, failing to understand your customer, ignoring the significance of a possible green revolution, jumping to the wrong conclusion, again by not having all the information to hand.
So risks for a business are many and varied. Feel free to add your own suggestions of what to watch for in the comments section below.