Manage the risk (Part 2 of 3)

December 9th, 2013

Spend some time thinking & planning & you may preclude a disaster at a later stage.

This is the second article of three talking about managing risk in your business, thinking strategically & taking more of a helicopter view of things that are important.    If you’re not familiar with governance check out this link .

Practical things that directors should be thinking about reviewing this time of year include:

1. Non-Executive Directors or Advisory Board Members
2. Board Performance
3. Board Strategic Review
4. Insurance Risk
5. CEO Succession Plan
6. Business Continuity Plan
7. Health & Safety
8. Emergency Response Plan
9. Business Plan
10. Budgets & Cashflows
11. Financial Management Reporting
12. Capex / Opex
13. Remuneration
14. AGM

The earlier article  talked about items 1- 5 & now we’ll look at items 6 – 10. Remember good governance is important no matter the size of your business

So let’s look at:

  1. Business Continuity Plan
  2. Health & Safety
  3. Emergency Response Plan
  4. Business Plan
  5. Budgets & Cashflows

Business Continuity Plan

What happens if you can’t trade for a day, a week or forever out of your current location? What do you need to relocate, what data do you need, how do you contact suppliers, how is data retrieved, what key records do you need, where are your client details & the list goes on & on.

Business Continuity planning is looking at these ‘what if’ scenarios & giving some thought around the issues before they occur. Remember you want to minimise the time your business is down.

A Business Continuity Plan considers 4 questions:

  1. Prevention
  2. Preparedness
  3. Response
  4. Recovery

So take the time & ask yourself some ‘what if’ questions & more importantly what actions do you need to take?

Health & Safety

Previous articles I’ve written talk about Health & Safety so I won’t go into it too much now, but annually I would suggest that you review (or have an external person) review your Health & Safety Plan.   If you are not involved in the day to day operational side of the business then as a Director you’ll want to know that this is an area that is well managed

Emergency Response Plan

An Emergency Response Plan (ERP) is the immediate go to document that you should have on site if an emergency was to occur.

It needs to be readily available to all staff, have key contact (staff, suppliers, neighbours) details & responses for potential emergencies. Training forms a part of the ERP, so should the unthinkable happen staff are able to cope & have a document to guide the initial decision making.

Business Plan

Again a lot has been said about Business Plans so all I’ll say is take time to annually review your plan for the coming year (be it calendar or financial). Your Business Plan should help drive activity & outcomes

Budgets & cashflows

People often get scared off when they hear the word budgets – it’s almost like the life is squeezed out of them & they think that sales targets are going to increase & expenses are going to get slashed – do more with little! Well that may be the case but I view budgets a bit like business plans – practical documents that guide activity.

A good budget starts with the end in mind.

In simple terms a good budget helps you ask:

  • What EBIT do you want
  • What shareholder remuneration
  • Return on capital etc
  • Add in expenses & you now have your GP$ target
  • Put your GP% across that figure & you now have your overall COS & sales figure
  • Break the sales in sales categories & you now have your sales targets

Drive activity across those areas & you end up with the result you are after. Pretty simple stuff, but should be reviewed annually from an overall perspective & reviewed monthly during management reporting.
Cashflow projections help you see where the money is going & allow you to see what happens if some Capex / Opex needs to be injected into the business. Plus it’s just good financial management!

So as you can see good business practice doesn’t happen by accident, but by a conscious decision to do those things that most just wouldn’t bother doing

The next article will look at items 11 – 14 above.

If you would like with assistance with any of the above contact Plan A Consulting

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