Tuesday, April 6, 2010

Recognize the risks

Consider a major investment company that had only one line of business—helping individual investors buy and sell stocks. When the investment market was at its peak, this company did a booming business. It poured its profits into expanding its business by hiring more people and opening more offices. But when the economy stalled and individual investors stopped buying, the company had no other sources of revenue. The company's stock dropped and they were forced to make huge layoffs which affected everyone in the organization. By exploring other sources of revenue, and investing some of its profits in those opportunities—and by doing some "what-ifs" about their rate of growth—the company may have lessened some effects of the disaster. Of course, some things are clear in hindsight, but important lessons are all around.

Use the results of your crisis audit as a basis from which to brainstorm potential crises. Question basic assumptions about your business—both the present, and the future. What assumptions do you have that might not be true? Ask yourself, "What would happen if people stopped buying our best-selling product?" or "What if demand for our product is so huge that we can't fill our orders?" It's important to do this as a group. Other people can provide a valuable perspective on each other's closely held assumptions. And finally ask, "How would this impact our group?"

Once you've determined what crises you need to plan for, consider ways to minimize these risks.

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