By Alan Lund
Jan. 6, 2011
Over the past few months I have heard several people refer to their “Bucket List.” Recently, a colleague stated he was headed to Africa. When I asked “Why?” he stated, ”It’s on my bucket list.” It appears that I am out of sync. I don’t have a bucket list; I have a Worry List. You know, things that I worry about with my clients. Things like cash flow, sales projections, financial and operational improvement strategies, etc.
A recent article by CFO Research Services (www.cfo.com ) listed the top risks that were identified by 168 senior financial executives. The Worry List was:
1. Financial Exposure – 51 percent
2. Supply-Chain / Logistics Disruption – 37 percent
3. Technology Failure – 33 percent
4. Security Breach – 23 percent
5. Natural or Man-Made Disasters – 21 percent
6. Physical-Assets Failure – 8 percent
As I reviewed this list and thought about the issues faced by several clients, the words that pop into my mind were Business Continuity & Viability. Business continuity can be defined as “the activities performed by an organization to ensure that critical business functions will be available to customers, suppliers, regulators, and other entities that must have access to those functions.” Viability can be defined simply as “the ability your company has to survive.” With these basic concepts in mind, let’s tackle the first two items on the Worry List and see if we can present some viable solutions.
Financial Exposure
I recently provided assistance to a client that had to respond to a preferential payment demand to return payments received prior to a customer’s bankruptcy filing. The financial exposure in this case was substantial . . . almost $1 million. With annual revenues of $18 million, this was a critical issue. As I worked with the client and their data, I couldn’t help wonder why a company would allow themselves to be that financially exposed, no matter who the customer might be. Since the fundamental definition of financial exposure is
“the amount that one may lose in an investment; the unprotected portion” . . . my assumption is that my client did not have a viable system to track, display and immediately deal with the early warning signals which were an indication that the customer’s wheels were about to go off the track.
I’m a believer in dashboards that track and display both internal critical processes and external key customers. I have accumulated multiple dashboard concepts and reaction plans. Regarding financial exposure, I keep remembering the line from Shakespeare’s Hamlet - - “neither a lender nor a borrower be.” Every business must understand and implement controls to limit financial exposure – as Mom would say, “It’s the prudent thing to do.”
Supply-Chain/Logistics Disruption
With the current economic crisis still impacting businesses across the globe, it’s critical that your company implement strategies that reduce your supply chain risks. A recent supply chain study by PTRM (http://www.prtm.com/) found that 67 percent of businesses plan to utilize “risk analysis tools and techniques” to identify threatened suppliers within their supply chain. These tools and techniques include key performance indicators such as supplier financial strength, level of business continuity/disaster recovery implementation, technology utilization, cost control methodologies and core process innovation, i.e., trailing or leading edge of the innovative process bell curve. I have a supplier assessment checklist that I use as a starting point to determine viability.
Closing
Well, there are my thoughts regarding two of the six business worries. I have ideas and strategies for the rest and would be glad to share. Let me know if I can help. Now, since I don’t have a bucket list - - maybe it’s time I get started. Here goes:
1. Write an article using the word Bucket List. Done.
2. See the movie where this bucket list phrase came from. Not Done
3. ?
Alan Lund is a Consulting Principal at UHY Advisors MI, Inc. based in Southfield, Mich. Alan holds a B.S. degree in mechanical engineering from Iowa State University. Alan can be reached at alund@uhy-us.com.