We’ve been around long enough to know that risk is never altogether avoidable. Even so, that is not an excuse to shrug your shoulders and hope for “better luck next time” whenever something goes wrong.
There are strategies you can implement that will help mitigate the risks that are avoidable and manage the ones that are not, and we have 6 steps that are crucial to the process. They start before your client even signs on, and extend five, ten, maybe twenty years down the road. Which one of these steps do you swear by?
Everyone is eager to get new deals through the door and on the books, but that doesn’t mean you can sacrifice the quality and strength of your underwriting process. Underwriting is crucial to laying the foundation you need for any new business relationship, and the devil is in the details. Without spending adequate time in the underwriting process, you expose yourself to unnecessary surprises and uncalculated risks. You probably don’t book a reservation at that new restaurant without reading at least a couple of reviews online. So why would you book a new deal without checking all of the facts?
2. Create Open Channels of Information Exchange:
Effective communication is key to success, and when you’re working with new clients you want to make it as clear and easy as possible for them to navigate your onboarding process. Establishing a straightforward method of communication, offering quick responses to questions, and being open about the ways you can help will build trust and help new clients feel comfortable. The more you build that trust, the more likely your client is going to be honest with you about what’s going on in their business. And that’s when you can work to determine creative solutions for your clients without exposing your company to hidden risks.
3. Control Cash:
This is so essential. Having a hand in where cash flows to and from alleviates a lot of the risk involved in financing a client, and provides you with a much better vantage point when making decisions on an account. When you really know the details of where money is going each day, you know your true exposure. This empowers you to make decisions without exposing yourself or your client to unnecessary risk.
4. Facilitate Ongoing Relationships:
You’ve got a great new client and they are communicative right off the bat. But what happens when you’re no longer the person that is answering their day-to-day questions? It’s extremely important to have a strong team that will be the face of the ongoing, daily questions and operations of your clients. This carries out the trend that you established during the on-boarding process and ensures that accounts continue to get the attention they need and deserve. Sometimes keeping your clients happy is as simple as giving them the right person to talk to. It may seem fluffy, but trust me; it will help keep your deals clean long after they’ve signed on.
5. Protect Against New Circumstances:
The trick here? Know what’s going on in your client’s industry, and understand the external circumstances that might impact their business. If you’re financing a few tech companies and Apple stocks start to crash, take note. You need to be aware of any changes that have the potential to impact what your clients are doing so that you can take the necessary steps to prevent against industry-driven ups and downs. This information is readily available to you and can help you make smarter decisions for yourself and your clients.
6. Conduct Portfolio Reviews:
You should have a system in place that consistently tracks and evaluates what is happening in your portfolio. This is a basic practice that often gets overlooked, and companies sometimes think that weekly or monthly team meetings satisfy the requirements for portfolio reviews. While those practices are equally important, real portfolio reviews are a totally different ball game. Portfolio reviews should be performed by an external consultant once every quarter. They evaluate the overall performance of accounts and bring your attention to inconsistencies that can get lost in the daily mix. When these reviews highlight issues, you are more readily equipped to fix the problem rather than let is snowball into an insurmountable risk.
Taking additional steps beyond these? Tell us your best practices and techniques to mitigating risk.