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Risk Analysis & Contingency Planning

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In business, the adage "Failing to plan is planning to fail" resonates deeply, especially when unexpected challenges arise. This guide explores essential strategies for risk analysis and contingency planning, highlighting case studies like NW Works, where actual growth exceeded projections by 330% amid obstacles. It emphasizes the importance of flexible business plans, addressing core issues proactively, and preparing for both success and failure. By employing 'what if' scenarios and rigorous sensitivity analysis, businesses can effectively navigate uncertainties and ensure sustainable growth.

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Risk Analysis & Contingency Planning

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  1. Risk Analysis & Contingency Planning “Failing to plan is planning to fail”-Effie Jones

  2. What Happens When a Good Plan Goes Bad… • The CVE Bakery: How Can You Plan for the Impossible?

  3. And Even When Things Go Right, Things Can Go Wrong… • NW Works Janitorial and Business Plan • Actual growth exceeded plan by 330% • Board of Directors, staff and infrastructure issues • Mission in question

  4. NW Works Lessons Learned • Business plans need to be flexible and dynamic. Where you start is not where you’ll finish • Getting the culture ready is not something that is often addressed as a part of making a NP business successful- it needs to be • Core issues need to be addressed ahead of time or as they arise, including:

  5. Valuable Questions to Ask • What if scaling has some negative impact on clients? • What if the success or failure of scaling threatens to change your mission? • How will your stakeholders deal with a failure? • How will your stakeholders deal with a success? • What is your scale?

  6. Contingency Planning • Use “what if…” scenarios • Develop “Plan B” (and Z) for major decisions • Analyze major risks and make plans to mitigate them • Test Business Plan assumptions • Conduct a sensitivity analysis

  7. Most Common Problems of implementing scaling plans

  8. Mouse trap’s built and nobody comes • Grand expectations • Insufficient marketing • Wrong product • Wrong market

  9. All things to all people • No clear: • Niche • Target market • Differentiation strategy • Lack of clear competitive advantages We sell everything!!

  10. But we still have checks… • Undercapitalization • Slow start up • Unexpected expenses • Overstocked inventory • Didn’t plan forbusiness cycles

  11. Low capacity to deliver • Inexperienced business management • Untrained/wrong staff • Weak systems & infrastructure • Chaos

  12. Risk Analysis Exercise

  13. What is a Risk? • Possibility of loss or injury   • Someone or something that creates or suggests a hazard

  14. Risk Analysis • What can go wrong? • What exactly is the risk (cause not symptom)? • What are important risks? • What shall we do to mitigate or reduce severity or avoid risk? (actions) • Don’t confuse risk with cost • If risk materialize can have costs

  15. Remember the SWOT? • Likelihood of becoming a real risk? • Budget size • Probability • Outcomes/impact if risk does happens? • Staff • Money • Time • Customers • Etc. weaknesses Threats

  16. Sensitivity Analysis Exercise

  17. Risk Management • Start with the most severe risks • List possible actions to reduce probability and/or cost • Some risks can be avoided (e.g. avoid a specific requirement) • Contingency Planning - for the most severe risks that cannot be mitigated • List actions to take should the risk materialize/occur

  18. Ongoing Process • What did we learn? • What are the tasks of RM? • What is the risk status? • What has to be changed?

  19. Business Plan Pointers

  20. What’s it for? • Sales document for raising grants from donors and investors. • Internal management guide for all business functions. • Communication tool to inform key stakeholders

  21. What’s a “Good” Business Plan? • Solid business concept • Viable business model • Realistic and quantifiable financial projections • Achievable targets • Meaningful social impact • Demonstrates demand • A competent management team • Analyzes risk and plans for it • Doable!

  22. Tips #1 • Analysis to action (situation and risk) • Information relevant to decision-making • Data, facts, stats, numbers – back it up!! • Timeframe • Format • Use of titles and subtitles • Graphics / pictures • Length • annexes

  23. Tips #2 • Language • Repetition • Crisp and clear • Compelling • State assumptions • Executive summary • State problem, goals and needs up front • Key points

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