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Risks and Contingencies

Risks and Contingencies. Dr. Stan Abraham MHR 423 Spring 2005. Some Typical Risks. Company has no operating history Owners have no experience running a company A key member of the founding team leaves Initial capital needs may be underestimated Needed financing may not be forthcoming

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Risks and Contingencies

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  1. Risks and Contingencies Dr. Stan Abraham MHR 423 Spring 2005

  2. Some Typical Risks • Company has no operating history • Owners have no experience running a company • A key member of the founding team leaves • Initial capital needs may be underestimated • Needed financing may not be forthcoming • Revenues may be overstated • Competitive retaliation may be underestimated • An optimal location may be impossible to obtain • The economy’s turnaround may be delayed

  3. Contingencies • For each risk, state how the company would deal with it if it were to happen, or how it would limit the adverse impact of the risk • A business plan gets low marks for not acknowledging that it faces certain risks • It also gets low marks for not having thought through how it would deal with those risks • Don’t “invent” risks – include only those that are real

  4. Typical Format • Group the risk and contingency in pairs • For each risk (usually a sentence), say what the company would do if it happened (usually a paragraph) • Choose and stick to a consistent format • Typically takes up 2-4 pages double-spaced

  5. Any Questions?

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