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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

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
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