The Problem
A lot of business owners spend an unhealthy amount of their time worrying about what might go wrong.
Most ‘worst case scenario’ situations never happen, but the problem is that business owners have a natural tendency to worry about the future because they have not taken the time out to think through in sufficient detail what the future holds.
This means that the business owner’s mind is constantly occupied with concerns, which in turn means that is difficult to stay focussed on growing the business.
By understanding where the real risks lie both in the immediate future and further down the road and getting those risks down in paper in a formal business risk analysis document rather than occupying creative space in the brain, our part time finance directors can help CEOs and MDs avoid a lot of unnecessary worry.
It is dangerous not knowing what might go wrong; when the money might run out; whether a new product launch is viable; whether a competitor has the resource and motivation to drive you out of business; what risks are involved with penetrating a new market; how the market is changing (and how it will react to your future plans/products/services) and whether a recession will change the playing field.
It is also dangerous not knowing your internal risks; what products are delivering the greatest profit; what happens if key members of your team decide to leave; are you likely to reach market saturation?
At the point at which we engage with many of our clients the business owner is often feeling a lot of pressure and a sense of being overwhelmed. This tends to stem from a lack of planning.
The business owner feels they don’t have the time to plan or conduct business risk analysis in any level of detail because there are more important/urgent issues to deal with and yet the reason there are more important/urgent issues to deal with is precisely because there has been a lack of planning.
Business risk analysis is part of the planning process and just one of the fundamental tasks that a part time finance director from The FD Centre can undertake.. It reveals all the hidden hazards, which occupy the business owner’s mind on a subconscious level but which have not been carefully considered and documented on a conscious level.
The ‘shoot, fire, aim’ approach favoured by many entrepreneurs is great for making things happen quickly but often jeopardises the long-term stability of the business.
What is needed is a balance.
Most business owners have such limited visibility over the future that they are caught off guard when something happens. This can lead to major problems and sleepless nights worrying when the next big problem will emerge.
Ironically, once the business understands the risks, it means that it can move forward decisively and confidently. It is difficult to do this when there is cloud of confusion hanging over the business.
The Solution
The risk analysis process is linked to a number of other areas in our 12 Box Methodology.
Our aim (and the aim of each of our part time finance directors) is to work closely with you to take on the burden of designing the roadmap for the business. Having your own highly experienced part-time FD means that you can feel confident that your back is covered. Although our review process will reveal areas of weakness you specifically require help with, we take a very proactive approach to finding out where we can best help you. In other words, we don’t expect you to tell us what you need because that way, you are left to do the thinking. We work through a detailed methodology to ensure that no stone is left unturned.
Your part time finance director will work with you to understand the risk profile of the business and of the shareholders. Too many initiatives launching or running concurrently can be problematic. For example, if the sales department in the business is optimistic about growth and the ops department is under resourced this will doubtless result in a significant strain on the business.
By managing the company’s risk profile and the risk profiles of the shareholders the whole business can be brought into alignment and can operate as a unit rather than as set of individual parts. This is actually one of the most critical roles in any business and your part time FD will support and guide you through the process.
Because our national team comprises only the top 4% of the UK’s finance directors and because our business has over 2000 years of combined FD experience it means that we have an intimate understanding of every conceivable risk a growing business faces. This means that we can help you build a much stronger business by knowing how to navigate through the growth stages of the business cycle confident that you are equipped to meet the challenges as they present themselves.
When our part time finance directors look at ‘risk’ in your business, they also work with you to:
- Identify future risk areas across the business and share with key employees
- Include significant risk areas in the business plan
- Test assumptions to identify weaknesses in the plan
- Evaluate alternative scenarios and approaches which may lead to improved outcomes
- Consider contingency plans in case things go wrong
- Provide forecasts based on risk analysis
- Provide your organisation with an elevated sense of credibility (with a high calibre FD as part of the team, your organisation will be perceived by funders and other 3rd parties as much ‘lower risk’
- Act as a sounding-board to discuss and critique future plans
- Liaise with funders when circumstances change
- Test the effectiveness of your marketing
- Test the effectiveness of your operating procedures
- Identify problem areas before they become unmanageable
- Correct mistakes quickly before they cost too much
- Develop incentive schemes for staff to lower the risk of losing key members of the team
- Coach you and your department heads through the implementation process
- Safeguard all intellectual property including patents
- Implement hedging strategies where there are financial risks such as currency or interest rate exposure
- Improve resourcing to strengthen performance
- To re-engineer the business as and when the competitive landscape changes
- Improve customer relations where they pose a threat to the business
- Use our own experience and the experience of the wider FD Centre team and expanded contact network to help surround you with the best possible team
- Help you achieve your work/life balance objectives (careful planning is key to freeing up the CEO/MD’s time and energy)
- Guide you through the business growth stages so you know what to expect and how to deal with changes
- Help create a clear roadmap for delegating responsibilities and tasks out to your team to create more time and space for developing the business
- Help communicate the business objectives to your family where appropriate (it can often help to have a third party involved who understands the needs and concerns of your family)
- Devise a reporting structure which acts as an early warning system for problems
- Liaise with the DTI and lawyers to understand possible legislation changes and ensure compliance
- Investigate existing insurances and make sure that you are fully covered if things do not go according to plan
- Look into hedging strategies for borrowing abroad for example to fund overseas subsidiaries
- Reduce your personal risk by looking into other types of security/funding
Benefits to the CEO/MD and to the wider business
Risk and ‘worry’ are intrinsically linked. By identifying the risks, which lie ahead, we reduce the worry and help bring about a more balanced working environment. Knowing what is coming up around the corner is so important in promoting a more stable and confident working environment.
It is never possible in business to eliminate risk or worry but it is possible to create a framework, which allows you to focus primarily on growing your business while we implement systems, which lower your exposure to risk.
Knowing that you have a framework in place to mitigate risk means that you can free up time and mental energy. Constant worry about ‘what might go wrong’ is not healthy and is always counterproductive.
