I was interested to see that a recent Ernst & Young study showed that 31% of the companies questioned had cancelled contracts with high risk customers, with nearly a quarter saying they had already seen a key customer collapse.
On the other side the reaction to perceived risk was mixed, with 42% saying they had broadened their supplier base to reduce the impact of the failure of a supplier, whereas 46% interestingly had taken the opposite approach and narrowed their supplier base in order to be able to negotiate better terms.
Whichever approach is taken, the message has to be all businesses must be looking around them and considering the risks that may impact their activities. Whilst you cannot always influence or manage certain risks which are outside your direct control, a vital step is awareness. It is critical that all businesses in the current climate manage all risks very closely to minimise the impact that these may have on them. Ask, what are the consequences of X or Y happening – however unlikely that may be. Then either take action, or put in place a system or process that monitors that risk and alerts you to changing circumstances.
All businesses have fragilities, the issue is recognising that and acting on it.
