As a banker for over 45 years, I think I understand risk. In the case of my industry, I face many different kinds of risk on a daily basis. I am the founder and CEO of an Austin based bank that does business throughout Texas.
Representative risks for me include: How to maximize shareholder investment while providing a great service to our customers at an attractive price; bankers always face the risk of not being paid back for a loan they make and fraud of various types is always a risk that bank management faces.
When you think about it though, many of the same risks I face on a daily basis are faced by other business owners and CEOs as well. Going down the list, you have the same responsibility to your shareholders as I do. You have to make a profit yet still be competitive in the marketplace. If you are a business that carries accounts receivable you have a risk of not being paid for the service or products you have delivered. That one makes you rather like a lender! Lastly, the type of fraud risk your business may face may differ from that I may face but many businesses face the potential for a slip and fall fraud case, or a customer who begins buying from them using trade credit never expecting to repay it.
One of the biggest ways I manage the risks I am responsible for is the same way you might. Knowing your customer and having a good working relationship with them is the best way both of us can both protect our business risk while having a happy customer.
Surrounding ourselves with a team of trusted advisers is also important. My team of trusted advisors would be much like yours. I have other bankers on my trusted advisor team, nearly all businesses should have a corporate attorney that can help them with governance and other corporate issues, and lastly we all need an insurance broker (or two!)
With the complexity of health insurance changing and costs skyrocketing, having a health insurance broker who is keeping up with that ever changing landscape is critical. Most businesses need some sort of general liability and / or product liability insurance policy, and lastly if your employees drive their personal cars for business you should have some sort of commercial auto policy. If your workers are working in the oilfield or around construction, good workers compensation insurance is critical. The hard part is you can’t be an expert in all of these areas so you need to surround your business with those trusted advisers that can make your decisions more informed.
Bankers often require some sort of key man life insurance policy to protect their loan. If you have a partner in your business having a buy-sell agreement is critical. Buy-sell agreements are funded with life insurance.
Whether we like to think of ourselves as risk managers, all of us who are CEOs and CFOs of companies spend a large portion of their time managing risk. If you are a CEO, CFO, or other operations management person responsible for managing some portion of risk your company faces, I would love to hear from you. Either comment here where others can participate in the dialogue, or write me directly.