Managing the risk of risk

Early in my career I worked in the insurance industry.  I learned about providing strategic solutions for risks associated with the death of a business partner, the death of a spouse, the disability of key personnel, loss from fire and other hazards.  I showed clients how to create the liquidity their estates needed to avoid liquidation of assets to pay Uncle Sam after death. Nowhere, however, did we ever discuss the uninsurable risks that are part and parcel of every business.

As family business owners, we have a responsibility to better understand these risks and the insidious ways in which they threaten legacy, profits, even our existence.

Managing the risk of the uninsurable is where we face some of the greatest challenges.  Consider that the world has become a smaller place where change doesn’t come slowly over a generation. Change now comes rapidly, over and over again, within one generation.  The competitive advantage we enjoyed once, whether it was market dominance, a patented technology, government subsidies or regulation whose barriers kept competitors at bay, can evaporate in an instant.  Threats that once were theoretical have made their way to our doorstep and require our attention now!  It is a problem begging for a solution.

There are several practices that can help narrow your focus on the things that can make a material difference.  Unsurprisingly, you will probably recognize them even if you haven’t fully embraced a discipline around them.

Strategic Solutions for Uninsurable Risk

Having a relevant strategy with a clear mission and vision is the first step to managing what you expect of your team.  It is the means by which you can harness their focus on the behaviors that are aligned with the mission.  People want this clarity, they need it.  Next, you can wring out the waste in your processes by questioning your answers.  All too often the way we do things around here is because, it’s the way we’ve always done things around here.  Here lies precious margin!  Don’t overlook it.

Perhaps the greatest impact to managing these kinds of risks and developing sustainable competitive advantage is through work on your culture. In my last blog, I shared how Paul O’Neill, CEO ALCOA and former Secretary of the Treasury, provided one of the best antidotes to uninsurable risk. He did it by unleashing the discretionary effort of his workforce.  Hear me out.  Developing a culture where behaviors are aligned with your mission is one of the most effective ways to restore and preserve a competitive advantage.

So these three broad areas of strategy, process, and culture cover a lot of territory. They are the crannies of opportunity in your family business that can address the risks your insurance broker is unable to protect you from--risks which may pose the greatest threats to the vision of the future you have.

As leaders preparing the way for the next generation of leadership, there are few things you can do that will have a greater lasting impact. Introduce these critical thoughts to the conversations you are already having with your team.

If you would like expert assistance in developing strategic solutions for your company, we can help. Our experienced consultants have been helping family businesses with strategy, process, and culture in Tampa Bay and Florida for over three decades.