For many business owners, preparing for unknown unknowns’ (also known as ‘Black Swans’) appears impossible. If a business owner cannot know the unidentified risks which face their business nor see these risks coming, the logical conclusion is that nothing can be done to safeguard their business. However, with sensible risk planning, the impact of a Black Swan event can be reduced, saving your business money, time, resources and preserving its reputation.
What are Black Swans?
Black Swan events feature three key attributes:
- The events are beyond regular expectation, and regardless of the prior experience of the business owner, such an event does not appear possible or foreseeable.
- The event will have an extreme impact on the business, which can often have catastrophic consequences.
- Once the Black Swan has occurred, the benefit of hindsight can make the event explainable and predictable.
High profile examples of Black Swans in recent years include Leicester City overcoming the odds to win the Premier League title in 2016 and David Cameron resigning as Prime Minister. In 2017, potential Black Swans noted by The Telegraph include a possible collapse in the Baltic financial markets and an era-defining potential merger between tech giants Facebook and Apple.
For your business, Black Swans could be the death of an owner-manager, a large delivery of unsatisfactory goods, the insolvency of a major customer or the leak of commercially sensitive information. Black Swans therefore pose the question – ‘how can your business prepare for a Black Swan and minimise their impact?’
Preparing For Black Swans
Traditionally, risk assessments within businesses rely on planning and identifying risks based on the knowledge and experience of those undertaking the assessment. Therefore, any risk outside of the knowledge and experience of the group is unlikely to be considered or built into the assessment.
Although foresight of a Black Swan event is contrary to its very principle, there are ways to ensure that Black Swans can be identified quickly and addressed in a timely and efficient manner. Your business can prepare by:
- Considering and raising awareness of Black Swan events.
- Implementing up-to-date technology and processes into your business.
- Seeking the views of trusted advisers.
- Implementing or maintaining an up-to-date serious incident policy and a public communications policy.
- Implementing or maintaining a disaster recovery policy.
- Ensuring your business has access to financial resources or credit.
- Ensuring staff are trained to cope with a Black Swan event and continue their work productively (and flexibly, if necessary).
Given the above, Black Swans can no longer be left on the side lines of a risk management programme but must be high on the agenda of senior management and protections must be actively incorporated to safeguard your business.
How Verisona Law Can Assist You And Your Business
At Verisona Law, we can assist you and your business in preparing for and reducing the risk and impact of Black Swan events, including:
- Reviewing your business’s commercial agreements with customers, suppliers, distributors and suchlike to ensure these are fully up-to-date, properly reflect the relationships in practice and adequately deal with force majeure events, late payments and termination events.
- Reviewing business policies, such as data protection, health and safety, anti-bribery and corruption.
- Reviewing and drafting a shareholders’ agreement to govern the way in which your business is managed.
- Reviewing and drafting your business’ articles of association, tailored to suit the needs of your business and how it operates.
If you would like further information on how to protect and safeguard your business, please contact Grant Usher (Associate) at email@example.com or via telephone on 023 9231 2058.
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