At the time of writing, it is exactly a week since Boris Johnson asked anyone who wasn’t a key worker and who couldn’t stay at least two metres away from other people to stop working and join the list of people already staying at home as a way of containing the coronavirus outbreak.
The subsequent week has certainly been filled with more uncertainty, stress, worry and frustration that I can remember at any time since qualifying as an ADI and I remain in complete shock at just how quickly business has ground to a halt and financial security has disintegrated.
I was already working on an article about riskproofing my business before we’d even heard of coronavirus. I got the idea for it from reading Carly Brookfield’s comments a few months ago in which she asked us to look at risk from a different perspective to the physical risks we’ve become accustomed to managing.
Before becoming an ADI, I was an engineer and a key focal point of the engineering process was a document known as an FMEA (Failure Mode Effects Analysis). There were various types of FMEA that an engineering project team would produce, for example the design FMEA and the manufacturing FMEA, but all of these documents took the same format. It is very easy to apply that process to our businesses to create a business FMEA.
My business FMEA takes the form of an Excel spreadsheet. To enable the information to be easily sortable, the first two columns are index number and group, so risks to the car for example or financial risks can be grouped together and considered as a lump.
The next two columns are where we identify the actual risks to the business and make a note of their impact. These entries will come about through a simple brainstorming exercise and it’s of huge importance to list every possible risk that
comes to mind and consider the impact on your business with no consideration whatsoever to how likely that risk is to become reality at this point.
Once we’ve got a few risks identified (and this is a living document, so more and more can be added at later dates as the trading environment changes) we can set about prioritising them. We do this by giving them a score and that score is created by giving each risk a mark out of 10 under three separate headings.
Incidence: This is a score that reflects how likely this risk is to actually happen and a score of 1 means it’s very unlikely, whereas a score of 10 means it’s very likely. For example if you’re thinking about your car being damaged to the extent that it can’t continue lessons for the day, then damage like that being caused by a pothole is very likely, damage caused by a car crash less likely and damage caused by a rocket fired from a passing American drone very unlikely. It is helpful to reserve the score of 10 for those risks that are pretty much certain to happen at some point.
Detection: How easy would it be for you to recognise that the risk has happened? That’s what we’re thinking of here. In this category the higher scores represent increased difficulty in detecting a problem whilst it’s still in its infancy so a 10 is very hard to detect whereas a 1 would be instantly discovered. Continuing the example of our car being damaged and unusable, I would imagine that most of the risks you’d think about would result in immediate damage to the car and therefore quite low scores as they were easily detectable – such as if you hit a pothole and suffer an immediate blowout for example. This wouldn’t always apply though and it’s worth giving some thought to how you’d know if you’d suffered more discreet pothole damage that was perhaps destined to cause a blowout in the future.
Severity: This is a score out of 10 that reflects how bad the consequences would be for you and your business and the higher score means more damaging consequences whereas a lower one would be less of a problem for you. Using the same example again of the car being damaged to the extent that it needed repairing before you could do more lessons in it, you’d give a lower score if your risk resulted in the car needing a new tyre but higher if you’re worried it’ll likely need the front end to be totally rebuilt.
With all that done, the next column on the spreadsheet is a simple multiplication of those three scores for likelihood, detection and severity. With all of them attracting a maximum score of 10 individually, the maximum end score of course could be as high as 1000, and this would represent a massive risk to your business as it would be very likely to happen, difficult to detect at an early stage and very damaging to the business. The lowest score you could end up with is a 1 – very unlikely, easy to detect and not very damaging anyway if it did happen.
The next column is simply an action plan and actions should be put into place to deal with all those risks that have scored heavily to try and reduce either their likelihood or severity or make them easier to find. In engineering, certain industries have put in place rules whereby a product can’t be released for production if its FMEA scores are still above certain figures (in much the same way that we won’t pass our standards check if our score for risk is lower than an 8). As the master of your own business FMEA, you are obviously free to put such rules in place for yourself if you wish.
The actions are the main output from this process, but in engineering, a further four columns are used to repeat the likelihood, detection and severity scoring exercise ‘post action’ so that the effects of those actions can be assessed.
When I did this exercise towards the end of last year, I must admit that I never actually thought about the prospect of a single virus destroying the economy within weeks of first being discovered, but I did think about seasonal flu and the consequences of that taking me out of the game for a few days. Now in my business, I have a two-way cancellation policy that not only means that if people cancel with less than 24 hours notice then they pay me in full but also that if I cancel late on them, then their next lesson is free. This means that the cost to my business of me getting flu is potentially quite high and as a result, I’ve been having flu jabs and maintaining good personal hygiene habits for years now. To show how this process works, here is what my business FMEA document shows for flu:
|01||Instructor||Instructor has flu and can’t work||Lost earnings today, but also lost earnings next week due to late cancellation policy||3||1||7||21||Flu jabAlcohol gel in carAnti-Bac wipe car dailyOpen window regularly & keep heaters set to medium temperaturesIntroduce ‘yellow card’ clause into late cancellation policy|
And then after those actions are taken…
|Flu jabAlcohol gel in carAnti-Bac wipe car dailyOpen window regularly & keep heaters set to medium temperaturesIntroduce ‘yellow card’ clause into late cancellation policy||1||1||3||3|
Whilst reducing the likelihood of me catching flu seemed quite straightforward there, the big challenge for me was holding onto a fair, yet effective cancellation policy. Whilst others might use the Yellow Card idea, it is a genuinely new idea for me that came out of this process. The effect of that single action is twofold in that it reduces the financial loss to me dramatically in the event of me catching seasonal flu and increases levels of customer satisfaction as they feel more fairly treated when they get it.
Going through this process has resulted in many, many different ideas coming to mind that will hopefully make the business work more effectively when it reopens in the future. The result will be a business that has more robust operating practices, better terms and conditions, more secure takings and less opportunity for either me or my clients to become a victim of crime (there are quite a few risks associated with dealing in cash once you take some time to think about it).
We have a fantastic opportunity at the moment whilst we’re all off work and with many of our contracts either suspended or paused to give some real thought to how we operate and how we can come out of this better and stronger than we went into it
Source: ADI News
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