Over the past several weeks, we’ve taken a deep dive into our Member 360 tool, one of the multiple proprietary business tools that we make available to our CEOs and business owners. This week the series continues as we look at Risk Management.
Taking a more in depth look at each topic and rating your business in each area is important for the health and growth of your company. Risk Management and risk mitigation for your company is just one piece of the complete Member 360. If you haven’t seen the full evaluation tool, you can access the full MEMBER 360 here.
This week, we’ll look at the RISK MANAGEMENT questions and why they are important.
Do you have a disaster recovery plan in place?
When a disaster hits your business, having a well thought-out plan to handle disastrous events could mean the difference between closing your doors or getting back on your feet quickly. While you cannot anticipate everything that could happen to your business, you can mitigate risk by examining how to recover from a fire, theft, death or incapacitation of key employees, sabotage by a disgruntled employee, or a natural disaster itself. Step one in any disaster risk management (DRM) is to reduce your risk. Preventing, transferring, mitigating and preparing for risk is key. Are you spending enough money and resources for DRM, and do your team members have buy in? Once a disaster does happen, do you have a clear action plan in place to get key systems of your company up and running? Do you have enough cash on hand to cover your fixed expenses while you stand up your business activity again? Do you routinely run drills or exercises to assess how ready you are for a disaster? If you think you are ready for anything the universe can throw at your company, give yourself high marks here! Hint: most are not adequately prepared.
Have you implemented financial controls to minimize fraud and costly mistakes?
You’ve heard the phrase, “trust but verify.” Trusting your finances and financial information to key team members is necessary, but do you have controls in place to verify that your company is safe from fraud? Routine (and surprise) audits can help you sleep better at night, and may act as a deterrent to any of your team members who think you are not looking. In addition, examining your processes and systems to identify the high-risk / high-investment points that could be costly if a mistake is made is also a really good idea. Have you considered having a third party come in to take a look at these areas? If you feel confident you have controls in place, then rate yourself with a high score. Hint: most businesses don’t.
Do you have the proper insurance for key employees and for company needs?
Think of this question in this way…you have a rock star leader who drives profit, knows your systems, and is the engine that makes your company soar. What happens if he or she suddenly cannot work or passes away? How long would it take to find someone (or several people) to fill his/her shoes. How long would it take to recruit and hire someone with the same skill set? In a case like this, revenue and sales could take a big hit. Think about obtaining proper insurance for the key employees in your company. This can give you the cash needed to cover the absence and the cushion you need to find and train a replacement. Equally important is to ensure you have the proper level of insurance for your business. What if someone makes a catastrophic mistake that leads to a lawsuit against your company? Are you insured to the right level for errors and omissions? Are you insured to the right level if an employee sues the company? Having the right insurance company working strategically with your leadership team can make or break your company if something happens.
Do you have a short term plan if you are temporarily unable to lead the business for 3-6 months?
However uncomfortable the subject, planning for handling your inability to lead the business is critical. Do you have someone (or a team) in place that could “hold the fort down” if you had to take a leave of absence? Would they have the tools and support from your entire team to do your job for a short time? Things to consider – documenting your daily routine, providing access to passwords, providing access to financial accounts, and communicating via your strategic plan your short term (and long term) goals for the company will go a long way to mitigating the risk of a short term absence. An even tougher question, if you are a sole owner or partner, do you have a documented plan in place for business continuity or sale in the event of your death?
Many companies, especially smaller businesses, are not properly covered in terms of risk mitigation. It can be an uncomfortable topic and investing in it can feel like buying “air.” However, when the time comes (not if) that an issue arises, proper planning and coverage can literally save a business.
Our MEMBER 360 is an incredibly valuable tool when you look at each question in depth, as we have done here. This is the type of exercise we go through in LXCouncil meetings with our CEOs and business owners. If you’re a CEO, business owner, or entrepreneur who really wants to build a wildly successful business, you need more than a dream — you need a dream team.
Simply put, that’s what LXCouncil is … it’s a dream team comprised of other business owners, just like you. Peer advisory councils are an entrepreneur’s secret weapon. Members gain access
to knowledge and insights that their competitors often lack. That extra edge can really make
a big difference in how a company performs in a competitive marketplace.
If you are interested in learning more about becoming part of a peer advisory council, let’s start a conversation!
CONNECT WITH LXCOUNCIL ON SOCIAL MEDIA