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Startup Risk

How entrepreneurs can take stock of their business risk

selenasol
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Startup Risk

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  1. WHAT IF… • Suppliers are powerful enough (e.g.: monopolies) to extort upstream • There is a shortage of the supply of raw material, either because of natural disaster (like drought), a man made disaster (like war), or because a competitor (or some other market player) buys it all out first • The cost of your raw material fluctuate • You are exposed to currency risk across borders? What about policy risk such as tariffs • There is risk of raw material spoilage between when you buy it and when you use it • Your access to raw material does not scale with projected revenue/units sold • Your demand forecasts are way off (in time or scale) • You can’t control the quality of raw materials • There is industry consolidation that affects your suppliers • Your suppliers go bankrupt 01 SUPPLY RISKS

  2. WHAT IF… • Your manufacturing process outputs poor quality • Your partner does not meet contractual expectations • You cannot scale in line with units sold • It takes longer than expected to produce • You cannot protect your IP, especially when a partner is collaborating • Your plant fails (natural disaster) • Your employees strike 02 PRODUCTION RISKS

  3. WHAT IF… • Your goods are spoiled, damaged, stolen, destroyed, or lost in transport • You suffer from import/export, or other, delays • You experience delays and long holding costs • Your partner goes bankrupt or has worker issues • There is consolidation in the logistics chain (mergers/acquisitions) • The cost of logistics such as duties, shipping costs, or trade financing goes up • You receive compliance fines • Your product platform is not extensible (or requires full rewrite in Version 2) 03 LOGISTICS RISKS

  4. WHAT IF… • Sales take longer (or is more expensive) than expected • You can’t actually sign distributors • You get into exclusive partnerships that don’t deliver • Distributor (or their agents) decides to push another product over yours (not just competitive) because it makes them better margins or is easier to sell • Your distribution partners squeeze margins • Retail/Distribution channels are locked-in by competitor or for other reasons • You can’t close key customers in a concentrated market (few, but big, customers) 04 DISTRIBUTION RISKS

  5. WHAT IF…. • Customers don’t actually buy your product (perhaps because of need-feature misfit or they just prefer status quo) • Segment does not materialize (you were wrong when you identified a segment of customers with shared needs) • Market share falls short • Competitors or substitutes blockyou (by distributor/retailer or customer lock-in) or there are other barriers to entry you cannot bypass • Competitors launch a FUD (Fear, Uncertainty, and Doubt) campaign • You just get beat by competitors or substitutes • You get the pricing wrong (impact to your margin) • Cost of advertising is higher than expected • Marketing associated costs (such as retail rental) go up dramatically • Your internal infrastructure (IT) fails 05 MARKET RISKS

  6. WHAT IF… • Your product has bugs • Your support organization cannot handle scale or scope of complaints • You receive a lot of returns • Angry customers complain on social media or in the press • Customers don’t re-purchase 06 AFTER SALES RISKS

  7. WHAT IF…. • Your customers do not pay on-time (or at all) • Your debtors call on you when you don’t have funds to pay • Revenue or cost projections are off • You fail to calculate tax properly • Your internal accounts go awry because your accountant #epicfails • You suffer from changing exchange or interest rates 07 FINANCIAL RISKS

  8. WHAT IF… • Your project management fails (delays or quality issues) • There is key-man risk or heavy attrition • You cannot get the required supply of specialized talent 09 PEPOLE RISKS

  9. WHAT IF… • There are changes to political climate or release of new legislation / standards • There are macro-economic slumps / depressions • There are wars, terrorism, epidemics, etc • Technology advances unexpectedly away from your solution 10 PEST RISKS

  10. high HAVE A CONCRETE PLAN AND MITIGATE ACTIVELY RECORD IN RISK REGISTER & DO A QUARTERLY REVIEW Likelihood of impact MONITOR ACTIVELY USING TRIGGERS AND HAVE A PRE-BUILT ACTION PLAN, BUT DON’T ACTIVELY MITIGATE RECORD IN RISK REGISTER & DO SEMI-ANNUAL REVIEWS low high Severity of impact

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