Make risk management a priority

on 19 August, 2019

Kishor Harsiani, IBC’s Strategy & Finance Director, explains why the merchant industry must make risk management an urgent priority.

You’ll struggle to find a company within the building industry that isn’t working to a strategic plan. Whether merchant or supplier, everyone has a plan for future growth, and a strategy that outlines their vision, goals and objectives over the coming years.

Strategic planning is nothing new, but what companies often forget as they strive to innovate and stay ahead of the competition is to make sure their strategic plans are well-rounded and meaningful. So, what are the components of a good strategic plan? The company’s mission and vision, core values and objectives are obvious elements that need to be included, but what is often missed is exactly what systems and processes are needed to achieve them, then ensuring the right people go about using them in the right way!

Having an ultimate goal is fine, but this must then be broken down into practical stages and real-time actions that will keep everyone on the right course. Understanding your company’s strengths and weaknesses will help ensure the business is fully prepared, but internal and external threats can derail even the strongest strategic plan – and it’s up to everyone in the business to manage the risks.

If you understand the possible derailers from both inside and outside your company, then you can put plans in place to mitigate them, and are more likely to deliver on your strategy.

For independent builders’ merchants, the possible derailers start with the suppliers, as they’re the ones producing the products. Every merchant is ultimately dependent on suppliers giving them goods – and their strategy is likely to be ruined if they can’t put stock on the shelves.

Merchants need to make sure they don’t find themselves in a place where they can’t get the goods they need. For independent merchants, being a member of a buying group can help protect against this risk, as the combined purchasing power gives them leverage with a supplier if a product suddenly goes into allocation. IBC, for example, works closely with its suppliers to ensure that IBC members are protected from the impact of any product shortages.

For example, suppliers not properly managing their plant maintenance plans has, in the past, led to breakdowns and product shortages. If that is combined with a perfect storm of several suppliers within the same sector having problems at the same time – and we’ve seen it happen – it can really disrupt the industry.

But it’s not just down to the suppliers. Merchants also need to improve their efficiencies, and keep a close watch on them at all times. A lot of medium and large independent merchants are going through major changes at the moment in terms of their structures and organisations, making large acquisitions and outgrowing their previous strategies. When smaller independent merchants are successful and suddenly find their turnovers moving into the £5-£10 million turnover territory, many of the processes and procedures they had in place when they were smaller businesses will no longer be viable.

To prevent problems, merchants must truly understand the risks inherent in success. What additional health and safety procedures need to be put in place as your business continues to grow? What about human resources? Is your cash flow protected as your outgoings become larger and more demanding? More employees require additional financial and management procedures to be in place, otherwise you may be leaving yourself open to future problems.

No risk can ever be completely eradicated in business, but it’s only when the strategic plan has taken into account all the key possible derailers, and the risks have been managed as far as is possible, that a business can truly focus on innovation and moving forward.

If you’d like to learn more about how IBC can help support its members in developing strategic plans and mitigating risks, don’t hesitate to get in touch. Call us now on 020 3195 7957.

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