Revealing the risks [Archives:2002/46/Business & Economy]

The Road Ahead
BY RAIDAN A. AL-SAQQAF
[email protected]
In good times, it is easy to ignore minor faults and problems that occur inside a business, as long as markets are growing and profits are up. Unbounded optimism makes managers and decision-makers unable to foresee possible risks, and later end up silencing any signs of bad news. Sometimes the bad news lies in hidden internal risks that increase along with profits and growth
Taking risk is an integral part of any business strategy, but understanding the pros and cons of the strategy can help control and prevent unhealthy levels of preventable internal risks which are responsible for many business failures.
Internal risks lie in more than financial risks. Organizational and operational risks may also be just as critical. Managers should initiate actions regarding possible future crises, and take reasonable measures to avoid them. Some of these can come from growth, culture and information management.
The main risks associated with a rapidly-growing business comes from the aggressive can-do environment created as a result of the rapid growth. It results in management executives raising goals and expectations of their employees. Accordingly, employees may feel extreme pressures in order to reach their goals at all costs, even if that means overstepping ethical boundaries and company policies, or gambling with business assets and reputations, all in order to enhance their short-term performance.
In addition to that, further expansions in business operations can lead to overloading the business production capacity. The result is sacrifices in quality, delay in order delivery, and a public relations disaster. To avoid this, managers should make proper plans and allocate resources in a way that keeps control over expanding operations.
Risks may also occur due to the organizational culture. Business executives, as they get ahead in their careers develop a resistance to bad news. They want to be surrounded with people who share their pride in business and exude confidence about reaching high performance goals. This results in a gap between these executives, reality, and changes that take place, especially if it is in a “the boss knows best” culture.
Internal information management is critical for minimizing risks. Employees should know about corporate strategies. Managers should also engage in conversations about strategies and strategic uncertainties with their employees.
Such engagements can raise important questions about customers, technology, competitors, markets, or anything that can change the company’s way of doing business. These conversations can also enhance and support cooperation and coordination between different departments and branches. And hence, that ensures the best use of share information.
Endnote: The last thing business executives want to hear is: Watch out- risk looms! Internal risks if not controlled can be the reasons behind business failure.

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