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Should we have a risk management plan? The short answer is: Yes!
Now you are probably willing to listen to the reasons why you should. Based upon history in the world since 2000 we have been constantly affected by major tragic events of global significance that have destabilized countries, governments and subsequently businesses in the private sector. With each catastrophe that takes place that does not affect us directly, we breathe a sigh of relief, pray for those affected and get back to business as usual. That is all well and good until it comes to affect our own organization. We always think calamity will not happen to us.
Most managers in hospitality do not have much opportunity to work on significant issues like risk management. Risk Management tends to be the responsibility of those at the board and executive level and the operators seldom get involved.
Why is Risk Management so important? When we planned this article back in January Covid19 was almost unheard of, we had heard that there was “another virus” in China and something was going on with quarantine. It was not a global threat. Now we know otherwise! The greatest disruption in living history to life on planet earth.
Risk Management prepares you for events like Covid19. In a survey of 1500 companies by Gartner in March 2020 they discovered that just 12% of companies were prepared for a crisis on the scale of Covid19. Half of respondents said they were somewhat prepared. Many had policies, it was the triggering of their policies that was delayed.
You can either be ahead and considered conservative or you can be behind and play catch-up. Which way would you rather play?
Here are 6 core elements of risk that a manager can plan for, keeping in mind that the one thing that is certain about a plan is that it never goes according to plan!
So why make a plan, you ask? Plans give you a framework of careful thinking in a time when you have the capacity to weigh options and create processes, developing muscle is done over time and are ready to use when the time comes only if you have them.
Get the right insurance. Yes, it costs money now, but what about when that event occurs? There is insurance for just about everything. Remember how you used to feel in class when you had done your homework on time and others hadn’t? That effect is called confidence. Insure and sleep well. Does it cost money? Definitely. Would you like to have insurance paying you out in a crisis? Most certainly. So you have to do what is prudent now. There are plenty of insurance experts who will be willing and capable to direct your plans for the future.
In any crisis situation, cash is king. How much cash do you have on hand? Liquidity allows for plans to be implemented. Mercedes Benz CEO spoke on CNN in mid-March stating that the future of their business depended primarily on how they managed cash. Quietly and steadily grow a cash supply for future use that cannot be touched under any circumstances other than when you are triggering your plan. No matter what! 10% of earnings go to savings.
10% of earnings go to investment.
10% of earnings go to doing good.
Your business runs on the rest and pays out from here to its shareholders.
The savings will ensure cash, investments produce income and are assets, and all the good you have done will come back to you in many unseen forms.
Managing your impending liabilities will determine the timeline of your cash-burn. You are your own first priority. No payments outbound until all the angles have been studied. Freeze everything until you are in command of the situation. Then, communication is essential. You don’t have to go looking for it, it will come to you. Have a clear, honest story prepared for how you are going to handle liabilities, and stick to it. Preserving cash for life is a key concern, and though liabilities may shout loudly, they are not your navigator to successfully overcoming the crisis. Micro-payments are a brilliant way of ensuring that you are believable and credible. As long as you are paying something, no one can say anything, and most likely if you are making micro-payments you are doing more than most other people are, so your liabilities will be most appreciative for your efforts.
Your company is made up of people and it is the people that are going to help you keep on going, both now and at some point in the future. There must always be a contingency plan.
It is not very useful to wake up to a crisis and be carrying a lot of dead-weight that you are caught wishing that you had dumped a long time ago. Active risk management for managers is to be constantly aware of the people that they have and make sure that you do not carry people who add low or little value. Constant attention to your people will ensure that those who are onboard at the time of a crisis are valuable and will be able to contribute the most value.
Future income is essential in risk management. Not all income is created equal. Low cost - high return is the holy grail.
A great risk management plan will have clear sighted contingencies of what products or services have the highest returns. Golden Oldies - things that produced solidly in the past are go-to products for crises.
Concentrate on talking to your customers, let them know that you are there for them and show them that you care, without selling anything to them. Everyone is averse to further risk in a time of crisis, so be an open ear, be a shoulder to lean on, let your customers know that you are thinking of them. This may sound cheesy, but when you come out of the crisis, who are you going to remember the most?
You are not alone. When you are facing a challenge of the highest ordinance, so is everyone else. Create bonds with people around you that are not liabilities. Reach out to those in similar circumstances and create open dialog about how you are solving your issues and how they are solving theirs. Learn together and share the solutions.
DO NOT WAIT FOR THE NEXT CRISIS TO START YOUR RISK MANAGEMENT PLAN
Yes. Right now. Sit down and think about what happened during this crisis and how you were able to weather the storm. Then having done that, decide how you would have liked to have seen this crisis play out and then prepare accordingly for the next one.
It is certain that there will be another crisis. When, where, what and how we cannot know, but we can be sure that it is coming. Be prepared.