Crisis is inevitable – only the timing is in doubt

One of the great lessons of the current financial crisis is how many supposedly well-managed companies have been overwhelmed – forced into distress sales, bankruptcy, or highly dilutive capital raising – by their poor ability to foresee, plan for, and respond to events in financial markets.

As a result, risk management is a hot topic for publicly traded companies right now, but owner/CEOs of closely held companies are at risk as well in these volatile markets. What to do?

1. Make risk management a higher priority – think consciously and proactively, not just reactively
2. Conduct a vulnerability assessment – where are your risks? What could happen that would cripple your business?
3. Assume a problem will be bigger than it first appears – the iceberg theory at work (only the tip of the problem is visible)
4. Plan for multiple problems at once – when things start to go bad, they invariably come in sets of three or four, not one
5. Organize your response team now – key managers, as well as outside advisors