Thomas M. Bragg on Business Risk Management

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It was a lightbulb moment. A few weeks back, a friend and I were talking about  the tendency of some companies to analyze and hold meetings, hold meetings and analyze, discuss, research and discuss again without taking any action. We were interested in the root cause of the perpetual analysis (a.k.a. analysis paralysis). Was it an extreme desire for precision and perfection? Or was it a fear of making mistakes? Read the rest of this entry »

Over the weekend I ran across a tweet that got me thinking:

You must risk something to succeed. Where there is no risk, there is no chance of success.

The tweet originated with Steve Keating (@LeadToday). It inspired me. The message applies to so many facets of life. Let me explain… Read the rest of this entry »

It’s the last week of 2009 and I owe you a blog post. I know I’ve promised that I will run through the third step of the risk management process – planning for risks – but I want to hold on to that topic until things are back to normal after the holidays. Stay tuned. In the meantime, let’s talk about risk management and small businesses…

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In a recent comment on a Professor Pinch post, I listed three reasons that small businesses don’t practice formalized risk management. In my opinion, small business owners either:

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1. Recognize the need for risk management but choose to ignore it; or
2. Recognize the need for risk management but assign it a low priority; or
3. Don’t recognize the need.

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I’m sure there are some examples of each reason out there in the world of small business, but which one is the primary reason? Read the rest of this entry »

I feel like I’m procrastinating. I finished my initial series on step one of the risk management process – identifying risk. Now the plan is to move into writing about step two – evaluating the risks. I’ll get there, but I’ve got one more topic I want to address. Let’s talk about the traits of world class business risk management…

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I’ve been thinking about these for about a week now.  The idea was triggered by a comment exchange with Kristen on my last post. We talked about “formal” process vs. “formalized” process. Kristen is absolutely correct that risk management needs to be formalized – meaning done in a proper and regular form. But I don’t think it needs to be “formal” – using the definition “stiffly ceremonious, burdensome or onerous”. I know it’s semantics, but the difference in perception will be the difference between effective execution and just going through the motions.

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That exchange about a specific trait got me thinking about what other traits would characterize world class business risk management.  Here’s what I’ve come up with.

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I was thrilled to read Tim Berry’s November 12 post in his Planning Startups Stories blog. He was talking about 5 basic entrepreneurship skills that business schools don’t teach. One of the skills Tim listed was risk management. He wrote:

I don’t mean the technical side of risk management. Business schools are generally excellent at teaching the numbers and analysis of risk, mathematical tools to evaluate the time value of money, for example, and formulas to compare technical investment risk like the internal rate of return (IRR).

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I do mean living with risk. Not betting things you can’t afford to lose. How to sleep at night when your customers owe you enough to destroy you simply by failing to pay what they owe. How to figure out which spend is a reasonable risk for generating a future payback, and which isn’t. How it feels to take a second mortgage, or how it feels to tell a graduating high-school senior with a great record that there isn’t enough money for the college he or she has earned.

The risks Tim described are what I’ve termed “Business Risk” (creative, eh?).  Business risk management includes more than insurance and hedges. It is the continuous, active consideration and planning for all of the potential good and bad things that could happen to your business. The process doesn’t have to be formal or sophisticated. Expensive software and consultants aren’t required. Managing business risk is a simple process. But, it’s a simple process that consumes entrepreneurs (whether they realize it or not) and should consume owners/managers of established businesses. In fact, maybe the day-to-day effort invested in risk management is what defines the “entrepreneurial spirit”.

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How do you feel about that last statement? Agree? Disagree? Tell me why.

I was working on my next post – 3 Categories of Risk – but got sidetracked by Naomi Dunford’s latest . It got me thinking. In my first post, I pledged the following;

I commit to do my best to engage you and be engaged. I will strive to earn your trust and trust you. I will endeavor to write things that you may want to pass along and discuss with others.

After reading Naomi’s post and all the comments, I realized that I’m not doing a very good job at living up to my commitment. Sure, I’m covering the subject matter in a very businesslike manner. But, if I want to engage you and earn your trust there needs to be more sharing - more than the bio, more than the LinkedIn profile and more than an occasional tweet…

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So what’s in it for me? Why am I bothering with writing a blog? There’s no advertising. I’m not soliciting consulting gigs or peddling the next great risk management toolset. What’s the motivation?

. Read the rest of this entry »