CXO - Risk Response Consulting

CXOs sound like some kind of phantoms in your organization. These phantoms should have some kind of specialization and leader's role to play. Why CXOs? Mergers, acquisitions and consolidations are transforming virtually every industry, and the impact is global. Industry consolidation and integration are affecting risk management strategies too. The stakes are quite high in global businesses and companies need specialists to manage its portfolio of diverse risk.

I am sure everyone has heard stories of successful CXO who, in the end, could not achieve their targets of growth. They realized that both organic as well as inorganic growth strategies were too risky to execute.

Your risk assessment affects your decision making as well as execution. The priorities are affected the way CXOs see risks and act. Some times leaders step back fearing risks that are mapped in their risk list. They have painful dreams of phantom risks which are mapped in their brains. Leadership is largely how one responds to risk or posed business problems.

Let's check out risk mapping in the brains of these so called leaders. They say if it's not our core competency, outsource the activity to third party. Now, there are stories of outsourcing companies mushrooming and assuming greater control over their clients' critical business processes and thus becoming more embedded in their enterprise. The accountability is enormous on both the sides, and the margin for error is slim. It's a matter of business continuity for both of them.

Solution is not just conducting a thorough quantitative risk assessment that examines all possible scenarios or point of view as nobody can predict or prepare for every scenario. However, one can manage his response to them. Are processes built into the system that permits needed flexibility? Is leadership role and style predefined for the every phase of the business life cycle?

What role a CXO can play in this era of virtual organization and continuous change? And, do companies have CXOs in place with the capabilities of executing no matter what comes their way?

CXO postion is like a head farmer. How a farmer prioritizes his risks and resources and what is most important element according to him for a successful harvest this year viz. Soil, Seed, Fertilizer, Weed, Pest Control, Sun, Rainfall, Credit or Subsidy, Equipment? A well informed farmer might say it depends on crop stage and condition. Focusing only on using bio-engineered seeds can be too risky just like focusing on quarterly MIS reports.

For leaders, as for farmers, some factors are not in their control. Both leaders and farmers can plan for expected natural progression of events, but there are inevitable surprises that require analysis, agility and response.

A farmer cannot repeat same practices in same way in same field. Soil depletion, crop prices, weather patterns and new equipment, techniques, and supplies alter farming practices. Farming, as well as leading requires ongoing judgment and adjustment and mere rote imitation cannot be a success mantra.

And all knows how correct the predictions of the weather department these days are. :)

Today's leaders need ideas on how to respond to risks. They need to map the risks in their brain correctly to change the gears rapidly based on the situation confronted. Do you fear any phantom risk? If answer is in positive, call the exorcist now for Crisis & Risk Response Consulting.

Bad Growth Vs Good Growth

How you will categories "Rs.400 crore turnover business"? Is it a SME or a large business?

SME stands for Small to Medium Enterprise. However, what exactly is an SME or Small to Medium Enterprise defers from country to country and depends on the industry norms used to classify it like headcount or annual turnover of the enterprise. Many country use SME to refer to a business with fewer than 250 employees, while classifying firms with 250 or more employees as "large" businesses.

Developments in prices and productivity make it necessary to adjust the financial thresholds norms from time to time and thus many countries have recently amended the definition of the SME to improve business environment for SMEs in their country. The increase in threshold limit allows an important number of enterprises to maintain their SME status and ensure their eligibility for support measures.

SMEs are an essential source of jobs which foster entrepreneurship and innovation and are thus crucial for economic growth of the country. However, it is very important for these enterprises to ensure Good Growth.

It is always thought that SMEs are often confronted with market imperfections. SMEs frequently have difficulties in obtaining capital or credit, particularly in the early start-up phase. Their restricted resources may also reduce access to new technologies or innovation. Well, I would say, it depends on the business objectives of the SMEs and differs on case to case basis. Many factors contribute to Bad Growth like type of ownership, management style and corporate governance, high dependency on few individuals or resources, business control environment and commitment for Good Growth etc.

Let's consider some real life scenario which I came across recently.

Few Months back, I had met CFO of a leading food retail chain firm at their Office in Mumbai. And, to my utter surprise, they have not carried out any Internal Audit during past 4 years and have no immediate plans either to carry it out in near future. Now that's a Bad Growth.

I had heard the story of a business group having facilities near Mumbai at a drive of around 3 hours from my place that has grown their business significantly in a very short time and is growing at an incredible speed on a Y-O-Y basis. The directors staying in Mumbai are flying owned helicopters to reach the work place on a daily basis. Again to my utter surprise, I came to know that they have very minimal Internal Audit programme for their fastly growing business. The Internal Auditors mainly involved in transaction audit that too remained inadequate due to growing transaction volumes. I quickly realized that the remuneration paid to Internal Auditors justified deploying two audit clerks only. That's called step behaviour with Internal Audit.

Recently, I had a chance to meet and talk to Purchase Manager of a SME organization with CAGR of more than 40 %. This time again to my utter surprise, the guy asked me how Internal Audit is different from ISO Quality Certification Audit. I am sure such unawareness about purpose of Internal Audit is somewhat faked. In my knowledge there are many such SMEs having turnover of Rs 100 crore or more which have Quality Certifications but does not have an appropriate Internal Audit Programme suitable to their size of operation. What one could find is missing controls, controls overridden, mis-utilisation of resources, mismanaged processes and tacit people issues within such enterprises.

In India, private equity & venture capitalist are looking to invest in such growing businesses; however, the individuals in the organization who have vested interest have created an environment which is not conductive for the Good Growth. Processes and controls are highly dependent on few individuals leaving the business leaders helpless. Also, a mindset has developed among such SMEs to not to part away with equity due to the same reason as cited above. SME Leaders need to realize that they need to expand the business with professional help and requisite control environment within the organization which could alone strengthen its path to high Profitability, Efficiency and off course Good Growth.

Bolt-On Strategy : A Misfit Or Blinding?

What made Team India win against the mighty Australians and Proteas during recent test season? Was it a great game plan or great team efforts or vibes of monkey distractions or turning pitches?

How will next parliamentary election be won? By launching superior campaigns or by agitating against increasing inflation or government's china policy? Take any field; sports, politics or business, the question is enticing. Which is more important - a great strategy or great execution?

Traditional consulting firms have commanded influence for long by perfecting the practice of strategy development and helping their clients with strategic solutions to improve their business performance. However, more recently lure of strategy has waned. Now it is quite clear among many top executives that when innovation is at the heart of any strategy, execution becomes so more important as innovation always involves treading into uncertain waters.

When capital is available in market easily to risk on new business, mindset becomes vulnerable. There are too many uncertain factors that nobody can resolve. No matter who developed the strategy, it must be assumed redundant. As uncertainty increases, the value of a well-thought-out strategy drops. In fact, when one pursues an entirely new business model, no amount of research can resolve the critical unknowns. All that strategy can do is to give you a plausible starting point. From there, one must experiment, learn, and adapt.

Many leaders mistakenly remain attached to their same initial strategy. For example, a risk consulting firm targeting US and Europeans market; has based its resource commitment and value proposition on basis of talent cost arbitrage advantage that it had envisaged initially. The services constituted a new market - one projected to grow rapidly with boom in outsourcing and advisory services from India that will save a huge sum for US & European clients. However, the market did not materialize as expected due to changed competition, economic and political scenario.

After some self introspection, the firm realized as to what had gone wrong. Naturally, the firm simply blamed the poor timing & execution, incorrect branding and poaching of its' core teammates by another risk consulting firm. After all, their strategy was brilliant. Right answer, wrong reason. Yes, the problem was poor timing & execution, but the sign of poor execution does not amount to (self-judged) brilliance of the initial strategy. The sign of poor execution was that the partners never questioned the strategy in first place and thus never revised it.

Execution. For a proven business, it is about performing at or above known standards. Many large, established organizations are able to sustain success because they are ruthless about holding their partners and directors accountable to meet or exceed standards and Innovate.

Do you have any questions for us? Simply ask us any time - 24 hours X 7 Weeks. We provide Innovative Execution Support & Risk Consulting Services to Smart Entrepreneurial CEOs & Business Owners. Private Equity Funding Venture Capital Asset Management Green Field Project Planning Project Funding Mckinsey Suggest Bolt-on Strategy for Entrepreneurs running SME and needs funding for Expansion and Growth or for Mergers & Acquistions. Talent & Business Intelligence Software & Technology Skills with smart Excel Modelling.