Mitigate risk in your business with proper planning

This month marks the 75th anniversary of an event that changed history. The Allies called it D-Day.

On June 6, 1944, Allied forces left England and landed on the beaches of Normandy at five locations called Utah, Omaha, Gold, Juno, and Sword. Each beachhead had its own separate challenges, which included immense fortifications and sandy shores, but each also shared something in common: immense risk.

D-Day was one of the great rolls of the dice in modern history, but the risk was deemed necessary. During this diamond anniversary month, it’s important to recognize these risks.

The risks found in operating a manufacturing business pale in comparison to an early morning amphibious landing, but they are still important to discuss.

Risk in your business manifests in several ways, including the common (supply chain disruption) and the rare (natural disaster). Reducing risk at any shop should be an ongoing task like continuous improvement and upskilling.

Some of the top risks that can affect a metal manufacturer include supply chain delays, data theft/loss, and brain drain caused by poor succession planning. Problems that arise in any of these areas can cause a hit to profitability, or even cause a business to fail. There are a few ways that risk can be mitigated, however. They include:

1. Planning well. Having proper plans established for contingencies outside of your control can make any situation easier to deal with. Shops should have plans in place for dealing with delays and shortages, bad weather, and succession for key personnel.

2. Keeping good records. By keeping good records and creating backup shops can remedy data loss easily. Good recordkeeping also enables traceability, which becomes important in the event of a part failure at the consumer level or further down the supply chain that results in a lawsuit.

3. Diversifying. Diversifying into multiple sectors reduces the financial risk caused by an industry-specific downturn. Mixing short-turnaround work with yearslong projects also creates the necessary buffer against incoming work drying up.

4. Being fiscally responsible. Limiting your company’s debt load and keeping accounts receivables low will increase the on-hand cash needed to ride out any short-term downturn. Using this cash flow to invest in technology and people helps eliminate the risk of becoming obsolete.

Following these few steps, and the myriad others that mitigate risk, will reduce stress, often simply by having a plan in place to begin with. So start planning.