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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. |