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Risk Management
... is
always important. Effective risk management strategies are
important for a startup, a mid-size company, a large corporation,
a non-profit or a religious organization, and every government
agency. Without well-planned risk management strategies, virtually
every organization is destined to fail sooner or later. During
2008 we all watched the collapse of some of the largest, strongest
and oldest companies and institutions in the U.S. and abroad. A
key component to many company's ultimate failure was the lack of
effective risk management features.
At
Cascada Consulting we specialize in identifying
vulnerabilities and so-called "corporate insider blind spots" in
your company, institution or organization. From this base we
develop and suggest specific risk management measures for your
entity that will help you to implement these risk management
strategies in your corporation in order to reduce and manage
certain risks effectively.
Different Risk
Factors:
Our professionals have each a minimum of two decades of experience
in corporate research, consulting and in the practical
implementation of risk management strategies. Every company faces
different risks, e.g.: liquidity risks, devaluation or enterprise
value risks, default risks, legal risks, operational risks,
project risks, etc. ... just to name a few. Executives cannot take
these risks lightly, but instead they must be able to identify
risks and develop an effective plan to manage such risks. Look at
the many companies that failed in 2008 alone. Then take a look at
the so-called "untouchable" top growth corporations until 2008,
and then they suddenly lost 90% or more of their value/market cap
within just a few months. Now we're talking about many billions of
dollars of erased wealth in a single company within less than a
year. In most cases, the loss of value was unnecessary and
therefore the devaluation risks could have been significantly
reduced or even avoided.
No Excuses - Risks
can be managed effectively:
After a crisis, executives will often blame outside circumstances
for their failure of managing risks in a timely manner. Often they
will excuse themselves by saying, " ... nobody could have foreseen
this, ... everybody got caught up in this mess." Effective risk
management does not just rely on historic data, but must also
include the consideration of forward-looking potential risks to
avoid potential "Black Swan" scenarios. Perhaps some executives
were overly optimistic and even avoided discussing potential
risks. As they displayed a lack of foresight and as they did not
have a plan for this or that situation, they forgot to prepare
their companies for the various "unforeseen" scenarios. At
Cascada Consulting we purpose to imagine and discuss
hypothetical but realistic potential scenarios that could affect
your company in one way or the other. And then we develop a
specific plan how certain risks can be reduced or even avoided.
Risks can be managed effectively and you can be prepared for the
"surprises."
Example:
We remember conversations with many top executives of high-flying
growth companies in 2006 and 2007. They had every reason to be
very proud of their companies and their achievements, ... and they
thought that their growth and upturn would continue forever. Back
then we suggested a simple risk management technique regarding the
protection of the market cap of their companies which was a simple
stock split. Within just a couple of years their stock price had
already exploded from the teens into the triple digits and it was
time for a stock split. The premier example of solidifying the
market cap of a company during times of market corrections was
e.g. Dell Computer in the 90s. From 1990 to 1998, Dell performed
many stock splits and their stock price increased by nearly
100,000% (!). Once the correction took place in 2000 - 2002,
Dell's market cap lost only a small portion compared to the other
high-flying growth stocks that rarely ever performed a stock split
during the bull-market years and whose stock price was then
slaughtered into the low single digits and even into extinction
during the correction and/or bear-market phases.
The issue is that a
stock price in investor's perception may drop to the low single
digits during extended market corrections. It's a much longer way
down from e.g. $175 a share to a few bucks than it is from e.g. a
$35 stock price level. Sure, to some extent it might be all
investor's psychology regarding the fear factor, but that's what
happens in bear markets. In such periods, stocks no longer trade
based on fundamentals or technical indicators, but solely on
emotion. To perform stock splits during bull market phases is
often effective risk management regarding a company's enterprise
value. There are numerous companies who failed and fail to
implement this simple risk management strategy, and that's just
one of many very effective risk management methods to protect a
company's enterprise value.
Contact us today at
ds@scherf.com |
Cascada
™
