Risk management not just for big companiesRisk management not just for big companies

Typically when you think of risk management, you think of market segments which are subject to a lot of regulation such as medical or food. Yet, all companies are dealing with risk whether it's financially weak suppliers, a tsunami in Japan, collapsing economies somewhere in the world, a tornado in Kansas, or new regulatory hurdles, mitigating risk is a huge concern. Accenture's "2011 Global Risk Management Study" which surveyed 580 companies, takes a look at the progress companies have made since the company's 2009 study.

"Two years ago, the business community was still in a state of shock, only beginning to recover from a global economic meltdown," said Accenture in its executive overview of its latest report. "Then, risk management looked a lot more like crisis management than a forward looking, enterprise-wide approach to effectively manage the spectrum of business risks in a way that enables sustainable, long-term growth."

So why is risk management suddenly becoming so critical to overall business management and growth? Accenture noted that beyond the typical volatility in cash flow planning and marketplace complexities, companies are recognizing that they have "an opportunity to drive competitive advantage from their risk management capabilities, enabling long-term profitable growth and sustained future profitability."

Risk management has become so critical to companies that many have created positions for a Chief Risk Officer (CRO). In fact, Accenture's survey found that:

"Companies are spending more time and effort advancing their risk management capabilities as a business priority," said Steve Culp, Managing Director at Accenture Risk Management.

Small companies, big risk management opportunities

While much of this concerns large global corporations ($500 million to one billion dollars in revenues), the impact of risk management on smaller, supplier companies can be a compelling reason for these companies - such as molders and moldmakers - to look at risk in their own organizations.

When a large company like Toyota, for example, implements a "buy it where you build it" strategy for molds and molded parts, they are doing this to help manage the risk that comes with dealing with suppliers hundreds or thousands of miles - or a half-a-world away. Many OEMs have multiple sources for the same molds as another way to mitigate their risk should one supplier's facility shut down.

When these large corporations deal with small, privately held companies as many mold manufacturers are, and they ask you to fill out extensive financial forms, they are concerned about the risk you might pose to their business. OEMs have experienced their molders and moldmakers going out of business with practically no notice. This puts their business at risk as they scramble to get their molds out of these companies before the sheriff padlocks the door and the bank confiscates the property.

And now I hear the hue and cry of molders and moldmakers out there: "But they didn't pay us for the parts we molded and shipped!" "They didn't pay us for the molds we've built, even after PPAP or validation!" And that's true. I know a company that went under with GM owing them $8 million for molds. And a big molder for a major automotive OEM that went down still owing another mold manufacturer $13 million.

So, who should be blamed for this? Perhaps if even smaller companies - especially smaller companies - had a proactive risk management plan, they wouldn't have gotten into these situations in which their customers owned them.

Okay, so who should implement risk management practices? It's not just for big companies anymore. Every molder and every moldmaker should be evaluating the risks it takes when it decides to take on a customer. Will this customer pay according to the terms and conditions that your company has established? If this OEM doesn't pay for the parts you've shipped over the past 90 days, do you have the guts to shut the presses off?

Risk management is key to everyone's success! If the big OEMs and the big molders are managing their risk with their suppliers, then shouldn't the smaller companies - the mold manufacturers and the molders who are the lifeblood of the manufacturing industry - be managing their risk with respect to customers?

Can you just say "NO" to those customers that are not playing by your rules? How many more thousands of parts will you ship without getting paid? How many more molds will you build for this OEM while you wait for payment for the last three molds you built?

"[Corporations] are increasingly looking to risk management leaders to provide guidance on the path ahead, mitigating critical risks and enabling long-term sustainable growth," said Accenture's Culp, adding that "risk management drives better business outcomes." If the global corporate players are managing their risk, shouldn't you be managing yours?