Make Risk Management Part of Your Business Plan
- Mar 6, 2020
I was sitting on a half-empty plane yesterday on a short flight from Chicago to Rochester. While most of the seasoned business travelers sitting toward the front of the plane seemed to act with a business-as-usual attitude, I noticed a lot of masked faces appearing further down the aisle. Fear of the unknown, whether it is political, economic or health-related, is certainly a strong behavioral motivator.
In a recent article for ROI-NJ, I mentioned that I had clients who were wondering if this was a good time to execute some of their transition planning steps; some of my professional colleagues quoted in the article felt that the risk is overblown. While the jury is still out on the total health impact of COVID-19, it is becoming obvious that the effect on our economy, and particularly on small businesses, is very real.
So, what can business owners do to protect their family and their companies? They can take the same steps that we recommend regardless if we are or are not in the midst of any crisis.
Develop a Risk-Management Plan
A solid risk-management plan should answer these questions. If anything should happen to you, who needs to be notified? Who are your emergency contacts? How can authorized people access your computer and private files? What key financial or business decisions do you make on a regular basis that need to be maintained in your absence? Who are your key professional contacts, such as your financial advisor, attorney, banker and so forth? Where do you keep your most important personal and financial documents (e.g., deeds, insurance policies, trusts, wills, etc.)? Finally, if you are not able to operate your business, who will you appoint as your proxy, and what steps do you recommend that they take to keep the business operating and secure?
Regularly review the value of your business and the associated insurance protection to ensure that the amount of insurance is keeping pace with the value of your assets. Also review and update your buy-sell agreements periodically, if applicable.
Include a disaster recovery component in your plan. This should include a cybersecurity analysis, up-to-date protections and protocols for dealing with potential security breaches, and a supply chain disruption mitigation plan. This is critical should a crises impact your ability to source the goods and services needed to run your business. Note any other areas of the business where the quality of your products and services may expose your company to liability issues, such as food safety for example.
Develop an Agreed-Upon Communication Strategy
Clearly indicate who needs to be informed in case of an emergency, the information chain of who contacts whom, and the level and extent to which you are both legally and ethically bound to inform employees, customers and the public. Have a designated spokesperson who is authorized to speak to the media. The communication strategy may include a range of scenario planning to help you to explore different what-if situations and how you should react to each.
Be Prepared to Respond to Specific Challenges
Responses need to be reasonable, ethical, responsible and based upon the fact, not rumor or innuendo. For example, during this current coronavirus outbreak, encourage your family, employees and other contacts to follow the recommendations of their health officials.
Planning ahead is often the key to moving forward in business, and in life, relatively unscathed and better prepared to thrive when others are scrambling. There is no time like the present to begin the planning process.
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If you have any questions, we'd like to hear from you.
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