Risk mitigation and management is a critical aspect of business continuity and especially in the extended supply chain that supports the business. Risk mitigation and management is also a critical aspect of collaboration and partnership that can and should be engaged to address the challenges encountered on a daily basis. Risk is not just the ‘black swan’ event that manifests itself on a periodic basis, risk is also and more importantly the ‘potholes’ you encounter on a regular basis in the management of the business. It has been proven time and again that the best means to manage and mitigate the risk is to define, evaluate and develop mitigation plans to address the risk if an when it does occur.
I will focus in this discussion on managing the risk as it pertains to the collaborative partnership. Collaborative partnerships can dramatically increase your ability to quickly and efficiently mitigate risks and they can also add additional risks to the mix of your daily activities. Let me focus first on the first point, the ability to quickly and efficiently mitigate risks. First of all I think that one of the key driving factors of risk is the unknown and this is the result of many factors such as the unknown if a supplier will be unable to provide raw materials, or reaction and ability to support a change in regulation or volume, or a dramatic weather or other natural disaster type event such as hurricane or earthquake. The events that are driven by the human or business related unknowns can be evaluated and potentially resolved through a focused initiative while the natural events must be recognized and addressed through contingency plans that define your plan to execute when they occur. The planning for natural events is important because they will arrive as somewhat of a surprise for the most part. The human or business related events however can dramatically reduce or eliminate the risk through planning and business agreements.
This is where your collaboration and partner agreements come into play. These agreements will provide the means to clearly define the steps that will be taken in the event of one of the many business events that can and will occur on a regular basis. Prior to entering into a partnership one of the critical steps is to define the partner agreement which defines the boundaries and rules that will support the partnership. I suggest that you add a risk management discussion and section to your partnership agreement activity. The key to success is planning and planning for risk mitigation will reduce the impact of the risk when it manifests.
I think that another beneficial result of the risk mitigation exercise is determination of additional partners to add to the partnership. I think in your exercise there will be business risks that you identify from both sides of the partnership and some of these risks will require outside support to mitigate. When you identify these types of risks you can then search for the appropriate partner that can help you mitigate that risk. This will increase dramatically the value of the partnership to all members.
And now for the audience participation portion of the show…
Have you discussed with your leadership how to select the type of relationship to enter into with a new potential partner? What questions do you answer in order to determine the model? Do you re-evaluate your relationship on a regular basis in order to revise the relationship?