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What keeps you awake at night: apprehension about the value of the Canadian dollar? Supply chain risks? Product safety? How about regulatory burden?
If you are worrying about your manufacturing business rather than counting sheep at night, you might want to bring these concerns to the strategic planning table.
Leaders in many business sectors are discovering that taking hold of worrisome risks and addressing them directly within the context of strategic planning introduces unexpected opportunities and a competitive advantage.
For one beverage processing company that conducted annual strategic planning sessions with senior management and the board, discussions tended to be repetitive and mundane, usually focused on familiar blue sky themes. “Where do we want to be in three years? What are our objectives? What strategies must be in place to achieve them?”
This year, when the discussion turned to what made them toss and turn at night, the group became energized. These executives and directors quickly itemized more than 30 concerns they felt presented significant risks to the business. These included the potential end of supply management, a product recall, the long-term sustainability of the company’s business model, a new competitor, and so on.
When the facilitator guided the group to prioritize and address ways to mitigate these risks, the team produced a strategic plan that revealed new global expansion opportunities framed within a practical plan of action.
Essentially, this management team found how to “embrace the wobble.” Just like learning to ride a bike, they discovered that struggling through uncertainty enabled them to find a balance – and the confidence to move forward toward a new adventure.
Given the growing complexity of conducting business in the manufacturing and processing industries today, every management team should be integrating strategic risk identification and mitigation into their planning process. This is not intended to replace, but rather to complement, other models and tools for developing strategy. Adding this component enables management to build or strengthen strategies in a way that is congruent with addressing relevant risks.
A SWOT (strengths, weaknesses, opportunities, threats) analysis is a common component of many planning sessions. Typically, participants tend to focus on the most exciting aspects: strengths and opportunities. Weaknesses and threats tend to be afterthoughts.
While it is important, of course, to dream about the upside – expectations should be rooted in reality. Management must also anticipate and manage the downside. Effective risk management involves addressing four elements:
Although risks are sometimes considered when assessing threats in a SWOT analysis, hazards and operations tend to be addressed rather than strategic risks. Exploring the question “what business worries keep you awake at night?” can help the team think strategically about risks – about concerns and constraints facing the organization and the industry. This approach often piques participants’ interest and gets them thinking in new ways.
It’s important to determine which items on the list of concerns are strategic –those that could prevent the company from achieving its strategic objectives or impact its overall value. Explore these and think about how they should be dealt with. What if the Canadian dollar goes to 10 cents above the US dollar? Consider scenarios about what that might mean.
Once you have a comprehensive list of risks, you need to evaluate each one, reducing and consolidating the list to the most important strategic risks facing the organization. Looking at these priority risks strategically and their implications gets the team thinking about strategy through a different lens, leading to new insights and opportunities. For example, a key customer wants the same product next year at five cents per unit less. How can you reduce costs by five cents?
By building the planning process on a foundation of strategic risks you can transform corporate problems into assets. Every day brings new challenges; hug the uncertainty. Think consciously about risks, manage them better than your competitors and you will have a powerful advantage.
Go ahead - embrace the wobble.
Glenn Fraser is a partner and leader of MNP’s GTA region Food & Ag processing team; partner Ian Smith leads MNP’s GTA and Southern Ontario Consulting practice.
This article was published in the May-June issue of PLANT.
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