The business continuity plan is a popular concept across the world. Large business corporations go for such plans to prevent disruptions in business activity in absence of key functionaries in the business.
A provision of customized Financial Business Continuity Plan is an absolute necessity to mitigate critical risks in the business.
What are the critical risks associated with the Small & Medium Scale Business Enterprises? Some of the most respected business houses of the world have grown from scratch to greatness. All these individuals who attained greatness, regardless of which walk of life they came from, were the products of difficulty and not of facility. They faced challenges and emerged as super achievers.
Their stories are similar with the story of humble beginnings, family owned enterprises and solely depending upon the vision and initiative of the key driving force in the organisation.
They are valuable individuals who strategically or intellectually drive revenue stream either through their network or contacts or unique skill sets. All such organisations are essentially promoters centric. Therefore, their sudden departure from the business would invariably pose a major threat to the very existence of business enterprise.
Here lies the main risk to the Business what is known as “Succession Risk”.
The Key Questions: The Promoters need to answer the following questions in the eventuality of their permanent departure from the business:
- What do you want to happen to your business when you Die or Retire? Keep it!! Sell it!! Or Liquidate it !!
- Have you shielded your personal assets from your business ?
- What happens to the liabilities and receivables of the company?
- Who will protect the interest of the members of the business family?
- Who will take care of the unfulfilled dreams and aspirations?
- Whether a decent exit route to the members of the family / investors have been provided for by protecting the valuation of the business in the absence of key driving force?
Provisions to improve the credit rating of the company.
Provision of contingency fund to mitigate the risk of insolvency in the business.
An Entrepreneur’s job is to take risk. There is no substantial reward without taking a commensurate risk. And thus, risk taking is an integral part of the day to day life of an entrepreneur.
Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of this publishing house
– An article written by Mr. Randhir Bhalla