August 16, 2022 2 minute read
Richard Wright
Managing Director at ASPIRE Account Management
RISK MANAGEMENT
“the process which enables you to identify, assess, classify, action, monitor and either avoid, reduce, share or accept (at its current level) any identified risk”
So, there are always choices:
Avoid the risk by eliminating the probability or by not undertaking the activity in the first place
Reduce the probability and/or severity of the risk or extend the timescale of the specific activity
Share the risk with a third party by either transferring it (outsourcing) or taking out insurance cover
Accept the risk at its current level of probability & severity, accept the potential consequences and budget accordingly, together with contingency planning
The following definitions need to be understood before looking at Risk Management in more detail:
Qualitative Risk Analysis (subjective/manually classified)
prioritises and scores individual risks regarding probability and severity of impact
Quantitative Risk Analysis (objective/automated numerical analysis)
significant risks can be further analysed to identify potential outcomes at the overall Client Account, sales & marketing or individual contract levels. However, this type of analysis is considerably more complex & time consuming compared to Qualitative Risk Analysis and often requires specialised software
Residual Risk
the extent of risk remaining after mitigating action has been taken and controls put in place
Risk Tolerance
levels of risk which are acceptable to live with
All things considered, Qualitative Risk Analysis is the most practical form of Risk Management for Client Account Management & Development.
So, as a degree of risk exists in everything we do, your Company will need to decide what are acceptable levels of risk to live with otherwise you’ll be pre-occupied with risk management to such an extent that time, resource and/or cost cannot possibly justify.
It is also important to remember that some risks can have a positive outcome (where there is a chance to benefit) while others have a negative outcome (where there is a chance to damage).
There are also two categories of risk:
Recurring/Preventative - predefined risks (which are maintained in a Preventative Risk Register [PRR]) are searched for each time there is a new Client Account, sales & marketing activity or individual contract.
New/Reactive - new risks which occur unexpectedly and are added to the PRR as part of the commitment to continuous improvement.
Some risks will never be eradicated. Indeed, many will not need to be, or eradication cannot be justified. They'll just need to be managed/contained, or there may be some risks which are completely outside your control that you need to keep a very careful eye on throughout.
There will always be risk so please just accept it!
Some example checks and tips are given below:
1. OVERALL CLIENT ACCOUNT
·each individual risk and sub risk will need an estimate of the likelihood of it occurring together with establishing the severity of impact.
to do this there will need to be a rigorous assessment of the different potential outcomes and options on the best way forward in terms of the extent of time, resource and cost which would be justified in eradicating, reducing, sharing or just maintaining a particular risk at its current level.
as the Account Manager works through all risks and sub risks, each will be classified: green = low risk, amber = medium, red = high
reducing just one of the two main aspects of risk (likelihood or severity of impact) may be enough to bring the risk to an acceptable level (residual risk/risk tolerance).
click here for another 15+ checks & tips
Supplier Aspects:
financial performance & forecasts
client complaints
conflicts with mission statement, strategy, goals & targets
exit plan
click here for another 25+ checks & tips
Client Aspects:
client culture (& conflicts with own Company)
business performance/stability
management effectiveness
change management/control
click here for another 10+ checks & tips
Supplementary:
the 'threats & weaknesses' identified in the most recent SWOT Analysis will be a key input to the Risk Management process.
the Account Manager’s regular reporting on various people-related aspects will also keep anyone responsible for people management on their toes.
the Account Manager will also need to create and maintain a Risk Management Plan (RMP). This will be managed in terms of elimination, reduction, sharing or maintaining risks as previously described. Subsequent reviews of the effectiveness of the RMP are likely to identify beneficial improvements in process/procedure which will be part of your Company's commitment to continuous improvement.
overall performance and suitability of the Account Manager will be assessed by their own Manager 'off-line'.
whenever there is more than one risk for a particular activity/topic, the highest risk 'colour' must be used.
Also, as significant issues often occur within the Supplier's own organisation and are invariably overlooked, the following areas also warrant close attention:
is the Account Manager fully empowered or does he/she rely on the goodwill of others?
is there internal pressure to win Sales Orders in the short term when the Account development strategy is clearly based on the medium to longer term (presumably for very good reason!)?
are all current Sales bids &/or Proposition initiatives genuinely in the best interest of both the Client & Supplier?
2. SALES & MARKETING (S&M)
S&M activity can take place both inside and outside the Account Management process depending on who initiates it and whether or not it qualifies as Central Sales Team work (Major Bids, Sales Proposals, etc.). However, as many Suppliers do not have Central Sales Teams, all S&M activity will be part of Account Management.
risk identification and assessment need to begin at the very start of any S&M activity, reviewed on a regular basis and then a new cycle of risk management introduced if and when a Sales Order is won.
a 'green', 'amber' or 'red' alert for each S&M activity must be fed through to the Account Manager at the prescribed frequency.
this is not negotiable as it is critical for the Account Management process to work effectively and must be incorporated into the personal objectives of the person responsible for managing the specific activity.
again, where there’s more than one risk for a particular activity/topic, the highest risk 'colour' must be submitted to the Account Manager.
each Sales Proposition, Opportunity and Order won will carry its own individual risks which will in turn increase the overall risk to maintaining the Client Account up to the levels specified in the Targets, Goals, Strategy & Mission Statement - click here
if there are existing contracts in place, great care should be taken to ensure contractual consistency wherever possible regarding all terms and conditions but particularly key performance indicators, penalties, payment terms and warranties.
the evaluation of risks is very closely aligned with Sales Opportunity Qualification which should always be referred to when assessing S&M risks.
click here for complete list of all checks & tips.
3. WORK, SERVICE, PEOPLE & PRODUCT CONTRACTS
as above as appropriate
each contract will have its own Risk Management Plan and be maintained by the person responsible for managing the contract.
as with S&M activities, the person responsible for managing a contract must provide coloured risk alerts to the Account Manager at the prescribed frequency.
again, this is not negotiable and must be incorporated into the individual's personal objectives at the time the Sales Order is won as it’s imperative that the Account Manager is made aware of anything that could compromise the Client Account as a whole.
Some example areas to assess are:
timescales & deadlines
interfaces & third parties
people resourcing
teamwork
click here for complete list of all checks & tips
BEST PRACTICE QUOTE 12 OF 12:
“although often generating significant extra revenue, change is the biggest risk of all and can destroy timescales, jeopardise working relationships & eat profits”
Another 20+ components of account management can be found at ASPIRE Account Management together with over 300 free checks & tips - all of which aim to significantly improve supplier performance and block the competition.
NEXT POST: Introduction to Account Management
Account Management Blogs - the full set:
Introduction to Account Management
Understanding Your Clients
Supplier Values, Ethos & Image
The Account Manager
Client Relationship Management
Client Contact Management
Sales Propositions & Opportunities
Sales Opportunity Qualification
Balanced Scorecard
Client Account Performance Reviews
Client Satisfaction Surveys
Risk Management (‘today’)
As these blogs will be geared to anyone engaged in developing new business with clients or prospects, and for ease of context, I’ll regard all readers as account managers as everyone has the same endgame, no offence!
I really hope you, your colleagues & business associates find value in these blogs; please let me know either way. Please also get in touch if you think there might be potential for our businesses to collaborate.
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ASPIRE Mission Statement: "As the new business world emerges, enable suppliers to minimise risk in all that they do with particular focus on client retention, increased productivity & business growth"