Business Advisory Blog Business management information from Robert Griffin.

July 1, 2010

Risky Business

Every business is at risk every day of having something happen that has a significant negative impact on that business. Ask BP!

Well, no kidding, everyone knows that.

Okay, if everyone knows that, how come so few can tell you what those risks are? (Besides the standard – lost sales, higher costs, and declining selling prices.) Worse yet, few of those who have at least thought about it that far, know what they’d do if any or all of those things happen.

So what else could go wrong?
• What if a key supplier goes out of business?
– Do you know how financially strong they are?
– What would you do? How long would it take to qualify a new supplier and get material?

• What if your bank calls your revolver or changes the terms so you have to write a big check to meet covenants? Do you have the wherewithal?
– You say, “That can’t happen to us. We have a long standing relationship with our bank and we’ve always met our covenants.” Well, you’re wrong. The board at the bank can vote to change terms anytime they want. It may have nothing to do with you. Maybe they just want to lower their risk profile; maybe they feel they have too much out in commercial revolvers in this economy. Whatever the reasoning, you will be impacted. Point is: they can change any time. I’ve seen it, and you will have to deal with it.

• What if you have a major business interruption, for example, a local power outage for two weeks. It happened here in Central MA two years ago. Or what if your business had a fire or other unexpected catastrophe?
– You can’t deliver to your customers. How will you get back up and running? And how long will it take?
• Your customers around the country and the world don’t know, nor care, about your localized problem. They’re worried about their own business. How do you keep them or get them back?
• Do you have business interruption insurance?
– If so, you’ve had to go through the steps of planning for this.
_ If not, you should at least look at planning for this type of occurrence.

Bottom line: You need to think about the things that can negatively impact your business and plan for them so you don’t become the BP of your industry. Obviously, even very deep pockets do not replace good planning.

As Dwight Eisenhower said, “In preparing for battle, I have always found that plans are useless, but planning is indispensable.”

Robert Griffin
http://www.griffinadvisoryservices.com

568 Comments

  1. Not a problem thanks

    Comment by Robert Griffin — May 2, 2011 @ 10:38 am

  2. That is fine with me as long you give the proper credit and link to my site as you say.

    Thanks and glad you like the post

    Comment by Robert Griffin — May 6, 2011 @ 8:55 am

  3. I certainly do not mind as long as you give reference to me as the author and provide a link back to my web site.

    I would appreciate you sending me a copy of the resulting article or blog.

    Thanks

    Comment by Robert Griffin — May 6, 2011 @ 8:58 am

  4. As long as you give proper credit to me , the author, and link to my site that is fine.

    Thanks for visiting

    Comment by Robert Griffin — July 18, 2011 @ 1:05 pm

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