FROM NZCB —
Kevin Sceats Chairperson of the NZCB Board
Recognising and Managing Risk There’s a brutal truth in life some people refuse to accept: You have no control over many of the things that happen in your life.
People who resist this truth can become control freaks. They micromanage, refuse to delegate tasks, and try to force other people to change. They think if they can gain enough control over other people and the situations they find themselves in, they can prevent bad things from happening. Others know they can’t prevent bad things from happening, but they worry about them anyway. They fret about everything, from natural disasters to deadly diseases. Their worries keep them occupied, but ultimately waste their time and energy, because worrying doesn’t do any good. My experience is that if you put your energy into the things you can control, you’ll be much more effective. Don’t forget you’re not alone in your life or business, so get your team into problem solving mode asap. So, how do you differentiate between worrying and problem-solving? Replaying conversations in your head or imagining catastrophic outcomes over and over isn’t helpful. But solving a problem is. Some problems or challenges cannot be foreseen. But I’m sure we all recognise that risk is inherent in any business enterprise, and good risk management is an essential aspect of running a successful business. Some risks can be directly managed, other risks are largely beyond the control of company management.
Sometimes, the best a company can do is try to anticipate possible risks, assess the potential impact on the company’s business, and be prepared with a plan to react to adverse events. There are many ways to categorise a company’s financial risks. One approach is to put financial risk into four broad categories: market risk, credit risk, liquidity risk, and operational risk. Management has various levels of control in regard to risk. Market risk involves the risk of changing conditions in the specific marketplace in which a company competes for business. One example of market risk is the increasing tendency of consumers to shop online. The risk of being outmanoeuvred by competitors is another. In an increasingly competitive marketplace, often with narrowing profit margins, the most financially successful companies are good at offering a unique value proposition. This makes them stand out from the crowd and gives them a solid marketplace identity. As we turn over the pages of the 2020 calendar, New Zealand Certified Builders (NZCB) is already faced with some challenges. But as I’ve said to you on more than one occasion, we have a great reputation for meeting challenges and collectively finding solutions. That’s what we, and you, are good at. We do it better than any other building industry organisation.
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