Operating Risk Lessons From Bad Weather...
I’ve been watching a report on the impact of winter weather
on businesses in the North of the UK. These
businesses have seen reduced sales and, in some cases have had to lay off staff
or even close
down.
I’ve had two clients suffer from bad weather. One thought about the risks in time.
Basel II defined a great framework against which to assess
Operating Risk. There are 7 elements:
1.
Internal Fraud
2.
External Fraud
3.
Employment Practices and Workplace Safety
4.
Clients, Products and Business Practices
5.
Execution, Delivery and Process Management
6.
Business Disruption and System Failure
7.
Damage to Physical Assets
What were the risks here in the case of bad weather? It depends on whether you were a business
owner, a supplier to that business or a customer. In terms of the business owners, I saw the
risks as:
·
Employment Practices and Workplace Safety
·
Clients, Products and Business Practices
·
Execution, Delivery and Process Management )
·
Business Disruption and System Failure
Business owners and/or staff would not have been
able to get safely to their businesses to work (workplace safety and execution), customers (clients) would
have been prevented from coming for the same reasons resulting in lost sales
and business was obviously disrupted as a result. Even if staff and customers had been able to
get together, a supplier might not have been able to do so.
In the case of their suppliers, the risks were:
·
Employment Practices and Workplace Safety
·
Execution, Delivery and Process Management
·
Business Disruption and System Failure
Suppliers wouldn’t have been able to deliver goods for the
same reasons that business owners and staff couldn’t get to work safely and
would in turn have experienced disruption from being unable to deliver goods
and receive payment.
For customers of the businesses, the risk was mainly safety in
getting to the business and disruption to routine from the weather. They might also not have been able to go to
banks to withdraw cash.
At this point, people would now say “You can’t do anything
about the weather” or “It’s always the same in winter in that area”. True, but you might consider some of the steps below.
First, the art of forecasting is improving; information is
better. With this in mind, plan what
might happen and your response. If heavy
snow is predicted, supermarkets, for example, might expect to see a surge of
customers before it hits, so could stock up.
Second, if a business depends on “footfall” (i.e. customers
coming through the door), the owner can make sure that there’s access. This may depend on the local council’s
ability to keep roads clear, but pressure from Chambers of Commerce, Business
Federations and the general public can be brought to bear. What could you do to encourage footfall?
If footfall isn’t an issue, what can be done instead?
Third, is a business equipped to go to the customer if the
customer can’t come to them? Some can do
this, others can’t (a jeweller or tourist souvenir seller can hardly go from door to door in the hope of
finding a buyer, but a grocer probably could).
Knowing your customers and their needs is critical here.
How easy will it be for staff to get to work (and how
motivated are they) if conditions are difficult? Have a plan in place for communication and
(if necessary) safe transport.
Talk to suppliers. If
your business relies on key goods or supplies, arrange to get them in ahead of
time (this assumes you can still sell them after).
Risk management is about looking forward. What’s the worst
thing that could happen, and what’s the worst time that it could happen? How likely
is it to happen and what would be the consequences for the business if it did?
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in the world financial services
industry running different service, operations and lending businesses, I
started my own Performance Management Consultancy to offer solutions for
improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An international
speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610. Labels: Crisis Management, Customer Care, Productivity, Risk, Strategy
Credit For SMEs
Apart from growing their business, the main problem facing
SMEs (Small and Medium-Sized Enterprises) is finance. This is often the “make or break” factor in
whether an SME “hits the big time” or not.
SMEs regularly complain about how difficult it is to obtain
credit from banks. The latter,
unfortunately, aren’t always equipped to support SMEs. Some of the problems include:
·
Lending $100,000 to an SME can be more difficult
than lending $1million to a “large company”, even though the amount “at risk”
is less;
·
People may take more “on trust” when looking at
requests for large facilities for large companies whereas SMEs (who generally
needed a tiny fraction) are gone over with a fine tooth comb;
·
The risk of an SME folding is that the bank loses
a smallish amount of money; if a large company folds, losses could be
substantial;
·
SMEs often have to provide proportionately more security
than large companies;
·
Pricing for large companies is finer than for
SMEs, so it may simply be too expensive to borrow, even if repayment is assured;
·
Risk monitoring for SMEs is tougher than for large
companies (you don’t have all those lovely ratings agency reports or press
comment);
·
New capital rules and greater regulatory
oversight make it more difficult for banks to lend;
·
Relationship Managers are centralised into area
credit “hubs” and aren’t close enough to their customers to really know them;
·
Relationship Managers may have little authority
– lending decisions depend on committees.
So why is there this disconnect between banks and SMEs? In my experience, some of the causes are:
History:
Many SMEs are comparatively young and don’t have track
records to which they can point.
Management:
SMEs generally rely on one or two key people for their
success.
Larger companies can spread the
load (and therefore reduce the risk of the loss of a “key person”).
Finances:
Banks like audited accounts from reputable firms.
SMEs often don’t use “Big 4” auditors to provide
these.
Repayment:
Banks lend because they assess that the chances of getting
repaid (at a profit) are higher.
With
SMEs, this judgement may be more difficult.
Security:
SMEs may have little to offer in the way of security, short
of the MD’s own residence.
Profitability:
SMEs (as mentioned before) tend to borrow less than large
organisations and so aren’t as profitable as larger ones.
Banks have to look at how much they earn for
the effort they put in and the risk they take.
SMEs require more effort and are seen as higher risk for the same (or
usually, lower) returns.
Cost-Cutting:
Banks have moved credit managers into central hubs to save
costs/improve efficiency, at the expense of customer relationships.
Communication:
The remoteness of Relationship Managers from their customers
and a frequent reluctance of SMEs to speak to their banks except when needed
contribute to a lack of effective communication and knowledge-sharing.
So what are the non-bank alternatives (I have assumed that
personal and family sources of finance have already been exhausted)? They include:
·
Government incentives (if any) to guarantee bank
loans to SMEs.
·
Smaller institutions or mutual funds with SME
portfolios.
·
Overseas banks if you’re an exporter. Your buyer’s bank may be willing to lend the
buyer the money to buy your goods if yours won’t lend you the money to sell
them.
·
Government support (depending if the business’
product/service is deemed important enough).
·
“Angel investors” who specialise in SMEs.
·
“Crowdfunding”, which originated in the USA, is
a relatively new source of finance which helped to raise $2.7Billion in 2012
(an 81% increase on 2011) and is expected to raise $5.1billion in 2013.
With banks still under the cosh for previous bad lending
decisions, this traditional source of finance can’t be relied on.
Even if things calm down, I personally feel
that new prudential regulations and oversight will make borrowing from banks
more, rather than less difficult, with its concomitant effect on business
growth.
I have spent more than half my life delivering
change in different world markets from the most developed to “emerging”
economies. With more than 20 years in the world financial services industry
running different service, operations and lending businesses, I started my own
Performance Management Consultancy to offer solutions for improving
performance, productivity and risk management.
I work with individuals, small businesses, charities, quoted companies
and academic institutions across the world. An international speaker, trainer,
author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of solutions. For strategic questions that you should be
asking yourself, follow me at @wkm610.
Labels: Financial, Risk, Selling, Strategy
Effective Daily Time Management
“I’m being asked to do
more and more in less and less time.” Is a complaint I hear frequently from
those with whom I work. We’re all under
pressure to perform.
What’s happening? We
all have the same amount of time available, i.e. 24 hours/day, 7 days/week. It
doesn’t matter whether we’re rich or poor, old or young. We all have the same amount of time
available. We all have to eat and sleep.
When given more work, your choices are:
1.
Refuse (don’t take on the extra work);
2.
Find ways to be more efficient (i.e. do things in
less time);
3.
Share the load with someone else;
4.
Drop/delegate stuff which you no longer need to
do;
5.
Grin and bear it by taking time away from other
activities (e.g. sleeping!).
Of the above, I prefer 2, 3 and 4. 1 could be career-limiting (but you can ask for help or for work to be re-prioritised); 5 results in stress.
We consider it shows we’re “tough” to handle more and more
(if you want something done, get a busy person to do it). However, the mantra “Work smarter, not
harder” is what we should remember and ask ourselves:
·
How could I use technology to help me?
·
How could I automate any of the workload?
·
How could I streamline any of the workload?
·
How could I eliminate any of the workload?
·
What do I enjoy
doing (chances are, you’ll do it better/faster)?
· What will provide the greatest return on my time?
Here’s what I find helps me (different things work for different people):
Prioritise:
·
What must
be done (high priority), should be
done (medium priority) and could be
done (low priority)? What are the 20% of
activities that will bring 80% of your returns or rewards?
·
Remember that what is “medium” today could
become “high” tomorrow. That report due
at the end of next week may be low priority now (Monday of the first week) but
is high on the Thursday night before the Friday deadline!
Plan, Plan, Plan:
·
What needs to be done, by whom and by when?
·
Never assume that everything will happen when
you want;
·
Allow for errors (we spend huge amounts of time
correcting them).
Email:
·
Divide emails into “Action”, “Read Later”,
“Maybe” and “Delete” (than ks to Michael Heppell for this). Chances are, only
20% actually require action, and then not always immediately.
·
Don’t read every email as it comes in. Scan your emails 3-4 times/day, preferably
during those times when you can afford to be interrupted.
·
Don’t read “CC” emails. If it’s important, your name should be in the
“To” box, not the “CC” box.
Taking Phone Calls:
·
Use voicemail – that’s what it’s there for. You can then listen to your calls at leisure,
prioritise which ones to return and make all your calls in one go.
·
If you want a more “personal touch” and work in
a team, have one member pick up calls for others for an hour to
allow their colleagues to work. That member
can still scan their own emails and do other non-critical/low priority tasks
whilst their colleagues take advantage of the “quality hour” available.
Timing:
·
Know when you’re at your best (for me, it’s
early morning) and your worst (for me it’s after 3.30pm). Schedule important work for the time when
you’re at your best, and non-critical tasks for when you’re at a performance
“low”.
· Know your "time bandits" (what distracts you - e.g. gossiping at the water-cooler);
·
Take short breaks to re-generate (say 5 minutes
every hour).
Meetings:
These can be major time wasters. If asked to attend a meeting, be sure that
you know:
·
What is going to be discussed (ask for an
agenda);
·
How long it will take (try saying that you have
an “urgent customer call at the time you
want to leave);
·
Why you
need to be there (would it be sufficient for you to receive a copy of the minutes/action
points?);
·
If you have to be there, can you just attend for
the item that’s relevant to you?
Use “Pareto’s
Principle”*:
·
Use the 80/20 rule in your favour, i.e. you will
generally get something 80% right first time, but the remaining 20% is what you
spend hours on.
*Named after Italian economist Vilfredo Pareto, who observed in 1906 that 80%
of the land in Italy was owned by 20% of the population.
I have spent more than half my life
working in different world markets from the most developed to “emerging”
economies. With more than 20 years in the world financial services industry
running different service, operations and lending businesses, I started my own
Performance Management Consultancy and work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email
. My website provides a full picture of my portfolio of services.Labels: Career, Productivity, Strategy, Teamwork
Developing Talent – Looking Forward or Backward?
Any business – even a
business of one – has talent and needs to develop that talent. Improving skills and knowledge makes a
business run more profitably, less wastefully and more productively with more
satisfied customers.
One of the main criticisms that I hear is that appraisals
are “an excuse to sack people”. The way
that the Performance Review process is handled in some organisations suggests
that there is more than a grain of truth in this statement. Equally, it betrays a lack of understanding
and/or acceptance of the importance of nurturing talent and weeding out
under-performing and non-contributing members of the team.
Performance management means getting the results that an
organisation, its stakeholders and society want through:
·
Looking forward to what we want to happen;
·
Looking at what’s happening now;
·
Looking back to what happened;
·
Working out what happened in between;
·
Adjusting future behaviour in light of the above.
Where many organisations fall down is that they only look
back. They set targets, but they don’t
keep an eye on what’s going on now. The pace of change in this world is
increasing; what might seem like logical and fair targets now could, in six
months (or less), become unrealistic and even damaging to an organisation. This isn’t intended to be an excuse for not
getting things done, but rather to sound a warning that organisations need to
adapt quickly to their environment.
Those that don’t, die.
Suppose that the weather forecast for today says that it
will be sunny and warm. You decide to go
out. Within an hour of that forecast and
decision, the sky turns grey and the rain starts to fall heavily (not uncommon
in the UK). You haven’t gone out yet, so
you decide to take a raincoat and umbrella.
You react to changing circumstances.
Some people plough on regardless and then wonder why they’ve caught a
cold. The sensible ones go out whilst
it’s sunny, but take wet weather gear with them to allow them to react if
circumstances change.
The above may seem simplistic in the extreme to many, but it
illustrates the point of:
·
Planning with the information currently
available;
·
Keeping an eye out for new information;
·
Adapting and having a contingency plan for when
things change;
·
The consequences of sticking with bad plans or
ignoring significant changes in the environment.
Corporate management has been seen in the past to be
constrained by a desire to please shareholders to the extent that common sense
has been ignored. The average tenure of
CEOs has decreased, so they have less time to make their mark (and money) and
please those who put them there.
Assuming that there’s a sensible process in place, the most
critical part of managing performance is providing timely and constructive feedback
to change behaviour. Rather than
criticism of the past (which can’t be changed) turn it into a review of what has
happened and what you want to see in terms of future performance (the underlying point being that if such
performance is not delivered, the appraisee may have a problem, but not a
surprise). In short, review:
1.
What’s happened;
2.
What’s going on now;
3.
What’s needed;
4.
How does what’s needed differ from what was
originally needed?
5.
How are you going to support what’s needed in
terms of time, training and feedback?
This framework can be applied to anything from simple
behavioural issues to more complex, multi-faceted targets.
I have spent more than half my life delivering
change in different world markets from the most developed to “emerging”
economies. With more than 20 years in the world financial services industry
running different service, operations and lending businesses, I started my own
Performance Management Consultancy and work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be
asking yourself, follow me at @wkm610.Labels: Career, Productivity, Strategy, Teamwork
