COVID-19: Business status and risk assessment
The COVID-19 crisis is impacting business in many ways. Supply chain and distribution delays, changes in customer needs and new purchasing behaviours are some of the things disrupting the business environment.
It’s an opportunity to pause and take a snapshot of your current business so you know what to protect and where to adapt. From there, creating high-level risk scenarios and contingency plans will build more resilience into your business.
In this article:
- Why assess your business in a crisis?
- How to conduct a business assessment in three parts
- Business Model Canvas: Chart essential functions, revenue streams and partners
- Conducting a risk assessment
- Risk assessment tool: Chart high-level risk scenarios and contingency plans
- When risk planning meets innovation
Why assess your business in a crisis?
The purpose of the business assessment is to identify core functions and key people in your business to understand:
- Parts of the business most under strain, so you know what to protect.
- Opportunities to boost certain products or services to meet changing customer demand.
- New ways of working that can benefit both employees and customers
How to conduct a business assessment in three parts
1. Identify essential elements of your business
Do you have suppliers, distributors, agents, customers or other third parties that are essential to your business? Listing them is a first step to remaining connected, harmonizing business plans and identifying risks.
Do certain functions underpin your business? Are there ways to keep these activities going, even if it requires some adaptation? Some functions are fundamental to your competitive advantage and their protection should be prioritized. Others functions could be set aside, adapted or reinvented.
This could include technology, services, equipment or supplies that are essential to your business operations. These need to be protected. Look for opportunities to build relationships with additional suppliers, channel partners or service providers. Having multiple options or back-ups helps to build resiliency into your business.
How does your product or service solve customers’ challenges or meet their needs? Is it unique? Is it valued by your customer? Typically, a value proposition offers solutions to your customer’s pain, and offers them a clear gain or simplifies the jobs that they do. Ask if the current crisis may change your customers’ needs. Consider how your products and services may change, either temporarily or to meet future demand.
2. Assess costs and revenues
What costs are required to run your business? Are they fixed or variable costs? How do you identify these on the balance sheet? By product line, division, geographical segment?
Does your business rely on a particular customer, customer segment, product or service? Are there secondary or smaller segments that have potential to develop?
3. Analyse customers and channels
What activities are in place now to communicate with customers? Is your brand reputation intact? Consider how good marketing communications can strengthen your brand throughout this disruptive period.
Are you currently grouping segments by product, geography or income? Is there crossover between the segments that could offer opportunities?
How does your product or service get to the end user? Is it direct? Are you using distributors or selling to other businesses?
As you go through these questions, consider any new opportunities that may arise out of the current challenging business environment.
The Business Model Canvas
The Business Model Canvas (BMC) can be a useful framework for quickly understanding the business and its moving parts, identifying where your business is at risk and where you might find new opportunities. Use the BMC worksheet to draw out your main customer segments, key activities, partners, revenue streams and more.
Business assessment tool
Chart essential functions, revenue streams and partners
Conducting a risk assessment
The purpose of a high-level business risk assessment is to identify and prioritize fundamental areas of your business that may be vulnerable due to the COVID-19 crisis. Once you’ve completed your business assessment (above), you’ll have a clearer idea of core business functions, employees, customers and processes that might be under strain. Mapping risk will help you understand how to protect areas of your business.
BDC’s risk assessment tool has a list of seven business areas to consider, a formula to identify the likelihood of each risk and a chart to keep primary risks and back-up plans at a glance.
Risk assessment tool
Chart high-level risk scenarios and contingency plans
When risk planning meets innovation
Once you have a high-level view of potential risks to your business, take some time to map out risk scenarios in greater detail. Risk mapping isn’t all negative. In fact, as you think about contingency plans, you may identify new areas of opportunity or ideas to develop or distribute your product or service in new ways.
Innovations that come out of risk planning can help you pivot quickly in response to changes in the external environment. Some back-up plans may include:
- adopting new technology
- sourcing new suppliers
- building relationships with a new segment of customers
Often businesses come out of risk planning more robust and with greater opportunities on the horizon.
First steps in crisis management
Put people first and make rational decisions
Sales and marketing plan
Map scenarios and test new ways to engage customers
Forecast cash flow and burn rate