Risks and contingencies
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Risks and Contingencies. Dr. Stan Abraham MHR 423 Spring 2005. Some Typical Risks. Company has no operating history Owners have no experience running a company A key member of the founding team leaves Initial capital needs may be underestimated Needed financing may not be forthcoming

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Risks and Contingencies

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Risks and contingencies

Risks and Contingencies

Dr. Stan Abraham

MHR 423

Spring 2005


Some typical risks

Some Typical Risks

  • Company has no operating history

  • Owners have no experience running a company

  • A key member of the founding team leaves

  • Initial capital needs may be underestimated

  • Needed financing may not be forthcoming

  • Revenues may be overstated

  • Competitive retaliation may be underestimated

  • An optimal location may be impossible to obtain

  • The economy’s turnaround may be delayed


Contingencies

Contingencies

  • For each risk, state how the company would deal with it if it were to happen, or how it would limit the adverse impact of the risk

  • A business plan gets low marks for not acknowledging that it faces certain risks

    • It also gets low marks for not having thought through how it would deal with those risks

  • Don’t “invent” risks – include only those that are real


Typical format

Typical Format

  • Group the risk and contingency in pairs

    • For each risk (usually a sentence), say what the company would do if it happened (usually a paragraph)

    • Choose and stick to a consistent format

  • Typically takes up 2-4 pages double-spaced


Any questions

Any Questions?


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