Why De-Risking Your Business is a Smart Move!
By Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc.
No matter what your next stage for your business is, whether you want to grow and acquire or sell in the next year or so, de-risking your business will only bring you benefits.
Let me share with you parts of our methodology and structure that we use with our clients. We have defined 6 areas of Enterprise Risk included in our assessment tool and implementation plan.
Enterprise Risk is generally high among midmarket, private and public businesses, yet with the proper management and forecasting tools, they can be reduced or eliminated altogether. Doing nothing will definitely hurt the value of your business. Having a process and a plan in place is a worthwile investment.
Here are the 6 areas of Enterprise Risk for your consideration:
- Lack of a Formalized Strategic and Operational Plan
- No Alignment with Goals & Objectives
- Underperformance with Low Productivity and Utilization Rate
- Silo Mentality and Thinking
- Inadequate & Antiquated Procedures, Processes and Policies
- Overreliance on Key Employees
Over the years, NSS has found patterns of hidden risks typical in midmarkets. These issues come to surface when the company typically wants to engage in a next stage, such as acquisition financing or planning to get their company to market, then are surprised when the realistic value does not match the perceived value.
The good news is that the above six factors are all internally focused and under your control. With the right management tools, awareness and a relatively small capital investment, they can be fairly easily mitigated. Once implemented, it becomes part of an ongoing process/policy called Enterprise Risk Management or ERM.
External risks are also to be considered and should be incorporated in your ERM plan. To start the process, talk with your CFO to get support with the following steps:
- Look at 2 Types of Risks – External, mostly uncontrollable and Internal, mostly controllable
- Create a structured process to identify risks
- Identify patterns of hidden risks
- Recognize, understand and develop a comprehensive plan to mitigate these risks
Companies confront different types and levels of risks over time and there are many common threads that define risks and how they impact critical decisions routinely made by organizations. Having an ERM plan in place will position you for greater strength and increased value no matter what your next step is for your company. This is not fluff, but a necessity, so begin the discussion today.
For more details on the 6 areas of ERM, watch our 6-minute RudiTuesday Video! It will provide you with additional thoughts and criteria to consider. Yes, we have done it many times over and would love to help you, but most importantly to me is that you get it started! It’s all about value creation and choices.