Monday, November 12, 2007

De Risking a Risky Business

One very old definition of profit: It is an award of taking the Risk.
Business is always Risky: Combating the risk is also a smart businessman ship.
For a Global Business operation different type of risk are there which are as follows
1. Economic Risk
2. Envoirnmental
3. Geo Political.
4. Societal
5. Technological.
Obviously all these thing are to be taken in to consideration and how business is being done.
Question is what to do if any the above things happen and business slows down even it may come to a halt.
Answer to this question can be very ambiguous and very complex depending upon the complexity of the of the business problem.
De risking or minimization of risk is very important for every business but the exit berries are very high for all global business
Reducing the Exit Barriers:
a) Out sourcing 70 %of the activities. Manufacturing and Inbound/Outbound Logistics are to be out sources.
2. Core Activities like R&D should be kept in hand the hand of the firm that’s develops the technology.
3. Process: Business Process should be kept in own hand and continuous working and
innovation and evolution should be made.
Confidence Creation in the mind of the Vendors:
1.All vendors who are supplying products or services has to have a great confidence and shouldon the right side, they should be be equally aware about by business, and the ultimate customers who are buying my product and services where vendors plays an important role.
2. Commercial transparency should be maintained with the vendor.
3. Multiple vendors’ creation must be a continuous activity keeping in mind the price point without compromising the quality of service or product.
Confidence Creation in the mind of the Customers:
The customer is the ultimate Boss, they should not shy away from taking my services or product, firm must be very much aware of the business the customers are doing and about the customer’s customers.
Bad times stays for a limited period and again good time comes , so even at customers bad times the firm may have to stand by side of old customers with lower margins. If you loose a US$ 1 Mn customer today just tomorrow you can’t create another US$1 Mn customers. New customer creation is a difficult and expensive task.
It is during the recession period the hyper activity of the marketing dept should start scouting for new markets new opportunities.
Right time for Business Acquisition:
Cash Rich firms can utilize their excess reserves in buying out firms which are aligned in their line of business activity, or acquisitions of small firms which can come at a very cheap rate.
Confidence Creation in the mind of your Employees:
The employee of the firm should be taken in to confidence they are the firm real assets, during bad times they may tend to leave you or instead you want to get rid of them, in the whole process you may loose out many of your best internal talents.
Proper counseling by the top manager should be done, listen to their grievances and anxiety and make them know about the external situation, even they may come forward and may willfully ready for pay cuts. Here The HR Depts challenge is to retain the workforce and holding them intact.
Confidence Creation in the mind of your Investors:
Here is the real smartness of the firm’s management .Firm’s stock values may melt but the management has to be smart enough to do all positive corporate communication with the retail investors ,FII, VC,MF and the Bankers. Firm’s past financial track records should be highlighted, go ahead and say you can repeat the performance once again and even better.
Resilience: Economic resilience of a firm is very important .Time bound plan must be made to fight back the adversities.

The above Risk can come at any time please go thru this extensive report in the
World Economic Forum.
Please Click:

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