Risk: small supplier business threat or value-adding opportunity?
Having a healthy respect for the value that risk can add to your organisation will undoubtedly change how you approach it, prepare for it and deal with it. By putting the necessary controls, checks and balances in place you’ll be able to meet market requirements whilst taking a solutions-driven approach to internal and external challenges, which could be exactly what your business needs to take it closer to being procurement-ready, says Shawn Theunissen, head of CSR at Growthpoint Properties and Property Point (Growthpoint Properties’ enterprise development programme), in this month’s SmartProcurement.
No matter the size of your company or the industry in which you operate, the act of supplying goods and services will always involve a certain degree of risk. However, identifying and understanding risk in the context of your business can often unlock unique potential.
Theunissen outlines how you can go about redefining ‘risk’.
For many entrepreneurs, balancing risk and reward is an almost day-to-day activity. “This is especially true in the case of start-ups – as SMEs try to find a foothold for themselves in the market,” says Theunissen.
In order to make appropriate decisions in the context of this delicate balancing act, one has to have a proper understanding of the risks involved in each specific instance. This involves knowing the likelihood of the risk occurring, as well as the real impact should it occur. “Only once you have this information available to you will you be able to make an informed – and responsible – decision about whether to go ahead with an activity or not.”
For Theunissen, the starting point in any supplier’s risk identification and evaluation activity is understanding your business promise. “Your business promise drives your company’s reason for being. It is the essence of what you do and how you do it. As such, it gives the business purpose and drives all activity.”
By unpacking your business promise (for example, “service on time, every time”), you will immediately be able to identify high level risks (in this instance, staff performance, operations management, traffic, etc.) that you need to mitigate or minimise in some way before making this promise to the market. “These over-riding risks then need to be further analysed in terms of business operations.”
Minimising risk often has to do with the controls in your business, therefore, as you identify each risk it’s important to find a way to either eliminate it completely – a practical, workable solution – or limit the risk and its impact. “This is where you could identify new opportunities to do things completely differently or find a source of potential value,” says Theunissen.
“Involving your team is an important part of this process,” he adds. This is because their insights are based on their own experiences – and the day-to-day realities of their functions within the business.
“By including your team at this strategic level, you will additionally be able to ensure their buy-in once the appropriate controls are developed and put in place. This will also change their own perceptions of the company’s controls and reporting needs – and they will be able to appreciate the value these add to the business and their own personal effectiveness as a member of the team.”