Category Archives: Risk Management

Where do you fall on the cash management spectrum?

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cash managementI was on a call recently and the focus was cash, my favorite topic! We were talking about how much is the right amount to have on hand, looking forward at investments in the business, etc. Then, one person said: cash is either focused on in businesses that are in dire straights or high performing businesses. It was a great comment! Companies tend to focus on how much cash is on hand when they are about to run out and manage receipts and disbursements closely. On the other end of the spectrum for a very different reason, cash is managed daily to maximize the cash flow in the business.

I’ve favored the daily cash flow report. If distributed to key managers and key personnel, people become engaged in increasing how much cash is generated in the business. Conversations arise about significant expenditures and how much inventory is needed. I’ve seen people in different parts of the business work more closely together because they understand the interconnections in the business. At the end of the day, everything turns into cash. Where do you fall on the cash management spectrum?

Risk Can Be A Good Thing

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risk measurement and managementMany years ago, I worked with a man who said that people misunderstand risk. His perspective was risk is a variable – it can be a differentiator that creates tremendous value, or if not managed, can make things go very wrong in your business.

I’ve adopted his perspective over the years. And he is right. The critical factors are deeply understanding the nature of the risk, how it can be managed and if you have the capabilities to manage it or someone else is better off doing with that role. If you can’t or don’t have a perspective on what the entirety of the risk is, don’t take it on.

Successful businesses and people understand this. They take on risks that they have the ability to manage, but carefully evaluate those they don’t so as to not risk the entire ship if it doesn’t go the way they expect. Do you have a good grasp of the risks in your business and how to manage them?

Are you missing sales opportunities?

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missed salesI love Starbucks. Yes, I’ve fallen into the wide swath of followers that pop in on a regular basis. The product is always consistent and I know that anywhere in the world, I can count on it. But, I’ve been surprised lately by how early in the day they run out of food. I regularly frequent five different locations and have found at each location the salads (as well as all fresh items) ran out starting at 2:00 and over a period of weeks worked down to stock outs by 9:00 am. I’ve inquired at each store about this and all tell me they regularly run out of food early in the day, leaving many like me to search for lunch (or other food options) elsewhere. Wow! What a missed opportunity.

That got me to thinking about why this is happening. Is it lack of understanding of the true demand of the product? Does anyone look at what time of day food runs out? Surely, the cost of goods potentially not sold is so minor in comparison to the number of sales they are missing. Is there a supply chain problem somewhere (the situation became a supplier issue with no fresh food for a week)? I don’t really know, but as a customer, I’m frequently disappointed. So, how are you making sure you aren’t missing opportunities to satisfy the demand for your product? Do you have mechanisms in place to understand what your customers want and when? Do you have a supply chain that works and can seamlessly address any supplier failures? How do you not miss that sale?

Rushing Things

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rushing thingsI was sitting at a red light waiting for it to turn green. Just as it was about to turn, a young man on a skateboard came flying into the intersection. He clearly didn’t want to wait and was moving quickly. As the light turned green, he flipped the skateboard over and rolled across the intersection. Luckily he got up unharmed. Everyone at the intersection was paying attention and didn’t move when the light turned green. Disaster averted.

But that’s not always the case. We have all had times when in haste to get something done, the results were less than optimal. Rushing can lead to setting sites on the finish line – like crossing the street, but not recognizing the hazards around. There is a difference between moving quickly and deliberately and rushing. The difference is that risks are identified and mitigated. Are you moving quickly and deliberately or are you rushing things?

Losing your pants, literally. It puts a whole new perspective on risk mitigation

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escalator riskThe slow steady rhythm of the escalator carried two women and one man down from the upper level. Hundreds travel the path every day without incident, but not this time. The woman’s pants were slightly long for her height. When she got to the bottom, the pant leg caught in the escalator. Just like the movies, things seemed to move in slow motion. She began tipping over and finally landed face first on the floor. The escalator pulled her pants off inch by inch as her companions tried to pull them from the grasp of churning steel. Several others sprang into action, trying to find the emergency shut off button to no avail. Finally, after what seemed like an eternity, building security shut the escalator down. The woman stood up to a small crowd gasping in horror, with a bruised ego and ripped clothing, but no other apparent injuries.

I was mortified for the poor woman and think about her every time I see the escalator. She could have been seriously hurt, and was lucky she wasn’t. Watching people go up and down the escalator, most are distracted by a conversation, reading, texting or talking on a mobile device, looking for the person they are meeting, carrying large objects, etc. Anything but thinking about the risk the escalator presents. And the small sign indication caution along the bottom rail goes unnoticed by those riding up or down.

There aren’t too many vivid examples like this that highlight a very obvious risk that most people don’t even think about. But these sorts of risks are in every business and go unnoticed. The outcomes can be minor, based on luck, or severe. How are you evaluating and managing risks in your business?

Even the Best Laid Plans

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solutions riskOne of my favorite parts of the week is going to Zumba, a Latin inspired dance fitness program. Lots of great energy in the room, a fantastic work out and people who are genuinely excited to see you and be there. I regularly run into a woman in the locker room – creatures of habit we tend to find lockers next to each other. She hadn’t been in a while and was excited to be back. As she opened her bag to change, she realized she forgot her exercise pants

“I can’t believe it” she exclaimed. “I was really diligent this morning in laying everything out – I had a plan and can’t believe I forgot my pants.”

Luckily there was a store upstairs where she was able to find a pair of exercise pants. Figuring out her backup plan quickly allowed her to achieve her objective – making it to class on time.

Business is no different than life. How many times do you make plans, spend time and effort making sure everything is in place only to find that something falls through the cracks somewhere along the way? Even the best laid plans can go sideways. Building in back up plans when planning can help you stay the course to achieve your objectives. How are your plans? Have you thought through the various possibilities and developed a range of options to address the potential conditions you may experience?