The worst of the recession is over, and economists are projecting a new economic season of growth and recovery.
With that in mind, in the same manner that we do some spring cleaning to prepare for a new season in our personal lives, it is time for companies to “clean house” to help them prepare for a new economic season of growth, says William Sammons, a partner at Nichols Cauley & Associates LLC.
“The recessionary business strategies of cutting costs, shrinking operations and inventory, and minimizing risk have served their purpose in allowing companies to survive through the recession. Now, it is time for companies to throw out these old strategies to make room for the development of new strategic visions designed to capitalize on the opportunities presented in this new economic season and promote future growth and success,” he says.
Smart Business spoke with Sammons about how to position your company to take advantage of coming risks and opportunities.
Should companies avoid risk in this current environment?
No, risk is part of being in business and is not always a bad thing. Risk represents opportunities, and avoiding risk means avoiding opportunities, which, by definition, is a risk.
The current state of the economy and the recovery projected by economists creates the potential for lucrative returns and presents the potential for exponential returns for those companies that choose to take on new risks/opportunities now.
The key to success is understanding the risk associated with your business. Consider a company such as Polaroid who was a leader of niche technology in the ’70s and ’80s. Through the lack of identifying a key risk — a changing marketplace and technology to which they should have adapted — the company went bankrupt in 2005. The name may one day emerge again but not with the same recognition.
How can doing risk assessment and strategic planning help companies take advantage of new opportunities?
A detailed and thorough risk assessment is the key to identifying new risks/opportunities in the recovering economy. Through the risk assessment process, you can develop a thorough understanding of the risk associated with your business strategies. Then, from this understanding, you can generate a strategic vision of where you want your company to be in the future and develop a detailed road map to guide your business toward making that vision a reality.
How can performance reviews help move your company forward?
Performance reviews are an opportunity to assess the strengths and weaknesses of your employees and identify how each employee can best fill particular roles in the strategic vision you have developed for your business. Doing so will allow you to position your personnel in key roles that will allow your business to take on new risks/opportunities.
Performance reviews also give you the opportunity to communicate to your employees the strategic vision of the company, the importance of their roles in that vision and the benefits and rewards that can be achieved through following the strategic vision and assuming the new risks/opportunities presented to the business in this period of economic recovery. Reviews also present the opportunity to work with employees to develop individual goals that will lead to the achievement of the business’s goals and instill a sense of individual ownership in the strategic vision of the company. This allows them to buy in to your vision and make it their vision, as well.
It’s a key opportunity to realign your personnel in order to take on new risks/opportunities, to generate excitement and motivation.
What opportunities does budgeting present?
Budgeting is an important tool that provides the means for actively tracking your progress and evaluating your success in achieving the company’s strategic vision. It can provide important insight into areas where the strategic plan may need adjustments or tweaking. By identifying strategic missteps, you can make strategic changes sooner rather than later, saving your company both money and time.
Budgeting can also provide important insights into areas where new opportunities exist for your company. A carefully designed budget is an integral part of your strategic roadmap, which can align the broad ideas and concepts of your strategic vision with a set of quantifiable financial goals and a financial blueprint of how to achieve that vision.
What should companies be thinking about regarding internal controls?
With the undertaking of new opportunities, there will always be risk, because, without risk, there is no reward. However, carefully and well-designed internal controls can provide a means to minimize and mitigate the risks that these new opportunities bring to your company. The process of identifying and implementing these controls can, and should, be included in your risk assessment procedures. This will only further the knowledge and understanding you have of your business and the risks related to it.
Internal control should be carefully designed and communicated to all levels of employees. Also, they are only effective if everyone is following them, so lead by example and set a tone at the top that highlights their importance and ties them into the strategic vision of the company. By implementing, actively following and reviewing a set of strong internal controls now, you will position your company to capitalize on the unique and profitable opportunities presented to you in this economic season of growth.
Risk is all around, and the best way to deal with it is to use risk and risk mitigation tools to your benefit. Capitalize on the unique opportunities the current economic environment presents to your company. Understand the risk your company operates in and use it to prosper.
William Sammons is a partner at Nichols Cauley & Associates LLC. Reach him at (404) 214-1301 or firstname.lastname@example.org.