As a CAM professional, you make your living helping clients assess and prepare for disaster. Risk management is an every day process for the communities you manage. But most management companies don't put the same care and effort into assessing risk for the business itself.
Every business faces challenges and risk. In association management, though, there are so many moving parts that you are faced with an ever-changing risk landscape. To make matters worse, you may not have the resources or the time to spend thinking about risk management.
Now is a great time to spend some time thinking about the future of your business. As client budgets are completed and tax season hasn't quite begun, take a day or two to turn your attention to your own house. One way to make the process less daunting is to bring in team leaders and ask them to evaluate and make recommendations in their area of expertise.
A risk management plan can help reduce the threat of disruption and loss, especially when the you are following mitigation best practices. Let's go through some simple steps that you can follow to build a risk management plan:
Step 1: Identify Potential Risks
Some risks will be obvious. In one survey, CAM professionals reported that data security, changing laws and communities choosing to go self-managed were among the top risks facing the CAM industry. In addition to those, common risks include natural disasters, fraud and lost contracts. Other, less obvious risks should be identified as well, such as key personnel holding all of the company's intellectual property, or aging technology.
Step 2: Evaluate and Assess
Evaluate every asset and process in your business. Consider not just what could go wrong, but also how you could recover from it or protect against it. Rate each risk to determine the severity of the risk to the future of your business, as well as the probability that it could happen. Ratings can be as simple as 1,2,3 for Low, Medium, High.
Once you have rated your potential risks, add the probability and severity numbers together. The final numbers will determine the list of risks that are both likely to happen and severe to the success of your business.
Step 3: Develop Mitigation Plans
Next, take the risks on your list and create a plan to mitigate each one. Some risks should have easy solutions, such as cross-training key employees so that you have a backup if something should happen to them. Since you have a limited amount of time to work on this, focus on just the higher scoring risks for your first risk management plan. Save the medium and low risks for the next time.
Here are a few other examples of mitigation plans to get you started on the right path:
- Continuity and recovery: Your CAM business is at least somewhat reliant upon digital technologies. Nationwide Insurance reports that 25% of small businesses don’t reopen after a disaster. To prevent this fate, you will need to regularly back up your digital assets and focus on recovery capabilities.
- Client relationship management: What happens if the biggest community in your portfolio leaves because they are dissatisfied? Nothing good, to say the least. This type of threat should be included in your risk management planning, as client retention is paramount to not only maximizing profit margins over time, but also keeping the lights on. Implement regular checkups to identify unhappy clients before they leave while you still have a chance to do something about it.
- Accounting and reporting: If your CAM business is not properly handling accounting and reporting procedures, chances are you won't have a good handle on performance. What's more, you might fall out of compliance with relevant regulations, which is a severe risk. This summer, Accounting Web reported that $7 billion in penalties were levied from businesses by the Internal Revenue Service because of human error. Automate, and you can mitigate this risk.
- Disconnected Data: If your client data is stored in multiple programs, you are likely experiencing problems with data silos. Centralization can help mitigate threats by bringing your data and processes together into a more seamless framework. Software specifically built for association management can go a long way to mitigate the risks associated with disparate systems.
Vulnerabilities need to be reduced to a minimum at all costs, as the stones that have been left unturned could be the most dangerous down the road.
Step 4: Evaluate and Repeat
These three simple steps will provide a straightforward and easy risk management plan for your management company. The final step happens next year when you break out this list again, repeat the process and build on to your risk management plan.
*Image credit: Pixabay user Alexas_Fotos