I’m on my third cup of coffee sitting in my warm home office looking out the window—where it’s 10 degrees—at a woodpecker banging away at one of our trees. My wife says it’s an ash. I wouldn’t know an ash from my own … forehead. She also thinks the tree has some kind of ash borer, which I believe is often fatal.
While I contemplate the loss of this tree, I just read an article about how companies fail faster than they used to, so perhaps I’m in a dark place. I’d rather think about how individuals and companies prosper, but we need to know how to avoid corporate ash borers as well.
Risk analysis rightfully deserves a good deal of attention from management and the board for two reasons. First, as a leader in an organization—particularly those who lead a company with other people’s money in play, public or private—you have a fiduciary obligation to watch out for woodpeckers.
Good luck with our D&O coverage if you put your head in the sand. “Damn the torpedoes, full speed ahead!” sounds good if you’re a swashbuckling naval officer, but you’ll get sued if you ignore obvious risk in your business. You experienced this when you read in The Wall Street Journal about a failed company that ran into an obvious-in-hindsight torpedo and you said to yourself, “What a ship of fools!”
The second reason is more important. The life of your organization depends on you thinking about pitfalls that may harm you and taking appropriate action to minimize that risk. Building a wonderful company that employs many and provides a great service to your customers demands that you think about what could take you out of the game. You owe it to them!
In my own experience, many business leaders don’t like to think about risk. In fact, one of an entrepreneur’s greatest attributes is thoughtful risk tolerance. Without it, you’d never leave the house.
Like many dichotomies in business, this is an area where leaders need to deal with the ambiguity of holding two competing thoughts in their head!
Many of you recently finished or are putting the final touches on your operating plans for next year. I urge you to grab your senior folks, allocate an hour and ask yourselves, “What top three things could harm us?” Unlikely to happen and of little consequence? Ignore them. Even if they’re relatively certain to happen but of little consequence, ignore them. If they’re uncertain but have possible large negative consequence, have a plan in your back pocket. If they’re certain and large, change your course.
If you struggle with considering “bad stuff,” isolating the activity into a scheduled meeting cadence can make it more palatable. This is not a one and done exercise. Creating a tracking mechanism is about as simple as tying your shoe, but make sure you keep it updated with current thought.
I’m pretty sure the woodpeckers aren’t going to take down the tree this winter, so I’m going to finish my coffee. I am, however, going to put a note in my calendar to call the tree doctor in March.