Risk Perspectives

Thoughts & Actionable Ideas for a Better Tomorrow

Managing Uncertainty

Uncertainty is clearly the greatest challenge facing businesses today. Economic and political events are occurring at an unprecedented pace. The decisions and actions one may take at noon today may not be right or warrant some change just minutes later, given sudden changes. What’s more, it’s not just uncertainty. Volatility is an added factor in many markets and industries. And that’s not pricing volatility, but for some businesses, there’s now added vendor risk regarding performance and ability to stand behind warranties.

A good example of managing uncertainty and volatility is the challenge of quickly moving an aircraft carrier in battle to avoid a calamity and promptly launch the right combination of defense and offense. The captain must immediately understand how long it takes to turn the ship at a given speed and launch offensive as well as defensive actions. The successful captain employs a wide range of tools to ensure he has timely and accurate information, together with a crew that has practiced and well-honed routines. Successfully running a business in uncertain times with rapidly changing revenues, costs, and resources requires accurate and timely data about every enterprise element.

Many businesses have relied on time-tested models and processes to support decisions. For most of the last several decades, time and patience, coupled with adequate capital, have enabled managers to weather economic and market storms. We believe we are experiencing material changes that have an impact on virtually every facet of the enterprise and how one manages through this unprecedented period.

These uncertainties create opportunities for agile firms with strong risk management disciplines and practices that support the need for quick and comprehensive risk assessments that enable management to make informed decisions.

·     The possibility of event risk is always present.

     While systems and controls may mitigate the impact of event risks, the successful and thriving enterprise continually assesses all business risks in the context of current market actions.

   If you haven’t yet done so, talk to your vendors and have open communication channels to minimize the likelihood of sudden surprises that require immediate change. Anything you can do to create some level of advanced timing for changes ensures a better-managed outcome.

 ·     This is also a good time to make certain well-thought-out action plans that are in place to deal with all risks that might occur and impact operations, including, but not necessarily limited to profitability, capital, customers, employees, vendors, and reputation.

If you need support to manage risk and uncertainty, talk to us about our unique fractional approach that provides highly cost-effective solutions. 

Contact Tony Schweiger at aschweiger@smepeib.com