Risk Analysis & Contingency Planning

Social Impact, May 2008

Risk Analysis & Contingency Planning

“Failing to plan is planning to fail”

-Effie Jones

Social Impact May 2008

The CVE Bakery: How Can You Plan for the Impossible?

What Happens When a Good Plan Goes Bad…


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


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:


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?


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


Most Common Problems of implementing scaling plans


Mouse trap’s built and nobody comes

Grand expectations Insufficient marketing Wrong product Wrong market


All things to all people

No clear: Niche Target market Differentiation strategy Lack of clear

competitive advantages

We sell everything!!


But we still have checks…

Undercapitalization Slow start up Unexpected expenses Overstocked inventory Didn’t plan for

business cycles


Low capacity to deliver

Inexperienced business management Untrained/wrong staff Weak systems & infrastructure Chaos


Risk Analysis

Exercise


What is a Risk?

Possibility of loss or injury

Someone or something that creates or suggests a hazard


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


Remember the SWOT?weaknesses Likelihood of becoming a real risk?

Budget size Probability

Outcomes/impact if risk does happens? Staff Money Time Customers Etc. T

hreats


Sensitivity Analysis

Exercise


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


Ongoing Process

What did we learn? What are the tasks of RM? What is the risk status? What has to be changed?


Business Plan Pointers


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


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!


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


Tips #2 Language

Repetition Crisp and clear Compelling

State assumptions Executive summary

State problem, goals and needs up front Key points

Documents

Risk Analysis & Contingency Planning