Identify the Worst Case Scenario to Stop It

We all hate to consider what could go wrong simply because we often view it as negative thinking. It can be negative but doesn’t need to be that way.

A Little Preventive Maintenance

Think for a moment about your car. If you are wise you have routine maintenance performed. Of course some of that is preventive, like an oil change or a tire rotation. However, at the same time that is being performed other things are normally evaluated. For example, a tire rotation generally involves examining the suspension to look for parts that need replacing before they cause an accident, which would fall into a worst case scenario. Likewise, when most of us take a trip by car we don’t really expect car problems, but if we are wise we consider what could go wrong and make preparations to handle it.

Business is Similar

Let’s imagine you have made a budget that shows nice sales growth and good cash flow. You are fairly confident of your projections; so much so, in fact, that you fail to make contingency plans should sales and cash flow fall short. That is a dangerous approach. It makes more sense to identify the worst case scenario even if you think the possibility of it occurring is remote. Why? It is simply because doing so forces you to consider what steps would be needed to correct your course. Just like being prepared for unexpected car trouble on a trip, being prepared to take corrective actions when your business is not performing as expected can prevent trouble from getting out-of-control.

Forget the Negative

If you have not taken the steps to identify the worst case scenario and decide to do so, it is likely you will hear someone say, “Don’t be so negative. That’s not going to happen.” But they don’t know that. While it may be unlikely it is not impossible. So make sure they understand you also don’t expect it to happen but would rather know how you will handle it if it does. It helps to remain upbeat in your attitude to make it clear you are just preparing a response to the unexpected while still hoping it will not occur.

Let’s be Realistic

Despite my encouragement that you identify the worst case scenario to stop it should it occur, I’m not encouraging you to be a gloom and doom person. Let’s be realistic and not project out things that you know have about as much likelihood of happening as winning the big prize in the lottery. Like anything we can take this too far. Even though the worst case scenario is unlikely it doesn’t mean to embrace the nearly impossible. Doing that really is getting into negative thinking.

One other thing to consider is that once you have considered the worst case scenario and developed responses, then put it out of your mind and execute your original plans as best you can.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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