Business owners must plan ahead to manage risks

One of the most unforgettable moments of last year was during the world championship in Daegu when Usain Bolt was disqualified for a false start in the 100m. The disbelief in the crowd was palpable.

The titan had fallen short at a moment that required him to remain completely focused and calm in the face of difficult circumstances.

Every sport has it. Tennis players talk of the ‘big’ points during a tight match, such as a fleeting chance to break serve. For a footballer, it could be how you react to a perceived bad refereeing decision or be defeated in a match that your team is expected to win.

Business too has such moments. As you begin the year you must create a mind map for dealing with those moments when they come. What’s more, you must plan for them because as surely as the sun rises in the east and sets in the west they will come!

Business people have one of the most difficult and stressful jobs in the world.

Changing conditions constantly bombard them. Such as when one situation begins to rise as another begins to tank. More specifically, they must pay attention to order flow, earnings reports, trading history, sector performance, economic trends, current news as well as other influential variables in making decisions to buy and sell. Sometimes one bad decision can nullify weeks of hard work and turn profits into losses.

Every business will sooner or later have to deal with pressures brought on by people, situations or circumstances beyond their control. Who would have predicted that the shilling would lose ground the way it did to the dollar last year? Or the Tsunami in Japan? Or the spike in interest rates that virtually drove the cost of credit through the roof?

Lack of a plan to deal with such situations is often the basic problem for many SMEs. The arguments for preparing for such eventualities are many and irrefutable and yet this is a very common failing for most SMEs.

Research has often shown that if your plan sets out certain scenarios you are much more likely to achieve - or exceed - them than if you just keep barrelling along.

Unfortunately, most SMEs spend so much time dealing with the “alligators” that are snapping at their rear end that it is difficult to recognise the steps necessary to deal with such contingencies.

A plan disciplines you to look “beyond the weeds” from time to time and can often alert you to inconsistencies that need to be managed.

Poor procedures

Poor procedures are a constant challenge for a SME with limited resources.

Most entrepreneurs do not realise that the procedures in place to manage the unforeseen knocks in business need to be well designed to reduce the turnaround time.

Error correction is often a major waste of time and particularly management time.