Hello and welcome to today's webinar. Our speaker today is Shawn Hutchinson from RFN Global. Before I turn it over to Shawn, I'd like to let those of you who are live with us know that you may submit questions during the webinar via the Q&A tab at the bottom of the screen. This webinar will also be recorded so that you may watch or rewatch on demand at your convenience. With that, I'll turn it over to Shawn. Thank you. Hi, everyone. Thanks for joining us this morning. Our webinar today is really about managing risk in volatile, uncertain, complex, and ambiguous times. So that V-U-C-A time is referred to as VUCA. I don't know if you've heard the term before, but I go into a little bit of the history on it, which is interesting as we go through the webinar. This is going to take us about 45 minutes. If you do have questions, I'll monitor the Q&A. If something comes up that we feel like needs to be handled in the moment, we'll definitely stop and do that. Otherwise, we'll kind of leave the Q&A response to the end of the webinar. But I appreciate it. If you have comments or questions, please let me know. So let me tell you just a little bit about Ready for Next Advisory Group. I'm a partner in Ready for Next Advisory, which advises business owners on how to increase the enterprise value of their company. And often we're working with business owners who want to create a pathway to ownership transition in the future. Sometimes we're working separately on these things. We could be working on increasing enterprise value without a plan for transition or a plan for transition maybe 15 or 20 years into the future. In some cases, we're working with owners. We're building value as an urgent matter and transition or what we call a posture of transition or readiness is also a short-term matter, maybe within a year and a half or two exit. That's driven sometimes by age. The older the owner, the more likely they are to begin preparing for transition. Sometimes we're working with younger owners who are quite a ways from that. But you have to be ready. You never know who's going to show up and knock on your door. There are three ways to increase value. We spend a lot of time thinking about how to do all three of these things at the same time. So category one, you can increase your earnings. There are only a few ways that you can do that. As you know, you can increase your sales, you can lower your costs to deliver a service or a product, and you can also reduce your operating expenses. That's where those are the things that pull the levers on increasing earnings. How do they drive value? Well, they're important. You'll hear in the valuation community or in the market, for instance, that a multiple of earnings, and it's usually earnings before interest, tax, depreciation, and amortization, EBITDA, you'll hear that as a kind of benchmark valuation. But that's probably not the whole story. Risk and reducing risk, category two, if you will, of how to increase the value of your company has probably, in our opinion, the most impact on value, either driving it up or holding it back. There are many different ways to reduce risk. And that's why we're talking about VUCA today, because it has created an environment, started creating an environment for us to operate in probably 40 years ago when it first got noticed. So we'll talk about why we need to be attentive to volatility, uncertainty, complexity, and ambiguity, and some of the challenges that it creates for us that we may not be seeing or anticipating or even working on in our businesses. So reducing risk is a really probably the most determinating factor in the valuation of a company and also its transferability. And then you have to be best in class. And how do you do that? You talk to the marketplace about how you are. You use metrics. You create evidence that your company is better or at least equivalent to best in class companies in your industry. And there are some very specific things that you can do to communicate that both internally to your company so that it's represented throughout and communicating it externally to the marketplace. When you determine the value of the company, you're really looking at a lot of different areas of risk. Let's take three of them. One's macro risk, economic risk. And we deal with that a lot today. There are just some unusual circumstances that are kind of working in concert with one another that can be really confusing. For instance, we are experiencing inflationary pressures in the marketplace. You may be still seeing disruptions to the supply chain. So there are structural issues. But there's also the odd other side of that coin, which is still restrictions in the labor market. Very low unemployment rate, hard to recruit people, hard to retain people. And so that's an unusual combination that owners are having to deal with. Strange economy. Industry risk, specific to your particular industry. And those things are actually trackable. They are metrics that are tracked by a number of different sources. AED, your association, does a really good job of tracking some of those metrics and reporting on them and benchmarking. So we've got the macroeconomic risk. Those things are really out of your control. Industry risks you can work on as a group. But to a certain extent, they're also a little bit out of your control as an owner. What you can control and what is the alpha determinant of the value of your business is company-specific risk. And that would be referred to by a valuer as CSR. Now, there are traditional risk classifications that we need to be aware of, five of them. Strategic, operational, financial, regulatory, and legal, and also reputational. Let's take some examples of those just so that we can make them real. So an example of a strategic risk would be that a really viable competitor enters your market with a new product or service. And it challenges your ability to retain customers. An example of an operational risk would be that your supply chain breaks down. Probably didn't anticipate what COVID was going to do. And it looks like it's kind of loosening up. But that's an example of an operational risk. Financial risk, you are aggressively leveraged and interest rates rise. Here we are, right? We didn't think that was going to happen necessarily, but we're seeing the increase. And in some cases, it's impacting private business owners, but our experience in advising hundreds of business owners over the years is that private business owners are pretty conservative in taking on debt. So maybe the interest rates have not made it more difficult for you to manage risk financially in your organization. But if the banking industry does begin to tighten credit overall, that could impact you. It can impact your line of credit. Almost everybody has one of those, and you probably use it. Reputational risk. You make promises to a customer, and then your original equipment manufacturer can't support that promise. So it might be a delivery date or whatever the case may be. That's a reputational impact. And then regulatory or legal impacts might be your safety program is inadequate due to a lack of training, and someone is gravely injured, and you're sued. So it can be any combination of those things. You've seen risks. You've managed risks. You've had things come up that you didn't anticipate. You're also proactively managing, I'm sure, in some of these areas. But this is a useful classification of the types of risks that we need to be attentive to. There are also permeable buckets, right? What I mean by that is the risks are often interrelated. A strategic risk could also be interdependent with or interrelated to a financial risk. So we need to understand that there are cascading effects if there are multiple interrelated risks going on at the same time. Now, when we're working with a client, we're asking, we're doing some sticky work on the wall and we're saying, let's identify all of the risks that you possibly can in these five buckets. And then we're going to pick a few out that you think matter the most in these cases. And we're going to try to rank them using a very simple system. What is the likelihood of the risk? Score that one to five. And then what's the potential impact of the risk? Again, score it low, one, five, high, and then multiply the two together. You could have a really likely risk, but it doesn't have very much impact. You could also have a high impact risk that's not likely to occur or somewhere in the middle. So figuring out what matters and how it might show up and how it has an impact on your organization is an important part of authenticizing the risks together and also really rating what you are going to work on, because you can't work on all the risks at one time. LUCA is what I kind of refer to as environmental pressure on managing risk. And it's coming from four directions. It's pressing in on the risk profile of a business kind of from the all sides. It's always present. These things do not go away. It's always volatile. It's always uncertain. It's always complex. It's always ambiguous. But you can do some things within your organization to help manage the impact of this environment that we're working in. And let me give you a little bit of the history, because I think it's interesting. So LUCA was first described in 1985 by some economists. The economists named, they were university professors, Warren Bennis and Bert Norris. And they published a book called Leaders, the Strategies for Taking Charge. They identified LUCA as the, they framed it as challenges posed to the management team and leadership by these various external factors and what the consequences for corporate leadership would be. In the early 1990s, subsequent to that, LUCA came into the U.S. Army lexicon, and it was used as part of the War College's, the U.S. Army War College's response to the collapse of the Soviet Union. And with that demise of the Eastern Bloc, as we called it, as the one enemy of the United States, the challenge really was to find a different way to organize and implement new ways of seeing and responding under what could be a very different set of conditions. So volatility, uncertainty, complexity, ambiguity, you can imagine that that would be, you know, the sort of way of living in the Army, certainly on the battlefield, an extremely hostile, potentially deadly condition. So what are these things? You might think that the definitions at this point, 40 years later, might be absolutely standardized, but that's, it's not, it's not necessarily distilled and settled as we might like. So here are a couple of definitions and some examples of what we might drop into each one of these risk categories. So volatility first, changes are frequent and they're also unpredictable. That's pretty easy. I think we're all familiar with the idea of it. Now in the valuation of a business, volatility in earnings is really a value killer. So if you can maintain kind of a level, a level of earnings through growth, through better management of operations, and not be going up and down and up and down, you're going to be, it's going to be much better for you in terms of creating a high value business. What's the example of something that might change frequently and might change unpredictably? Pricing of the things that you as a business are buying. If there is volatility in that particular supply chain market, for instance, then that would be something that your supply chain manager, if you have one, would really need to be attentive to, to want to manage. Uncertainty, the impact of future events are unknown. Environmental impacts on infrastructure. What do we mean by that? You know, something, something in the environment, for instance, impacts your ability to get product when you need it. We see environmental disasters all the time. Hurricane impacts your business, for instance, or, you know, a fire impacts your business. So there can be impacts on infrastructure from those events, those environmental events that cause us to lose ground in those times. Complexity. You've got a lot of different interconnected levels or, or, you know, difficulty kind of seeing how things are structured. So in a project, for instance, you might have a lot of subcontractors and a lot of decision points as a result of that complexity, which causes problems for everybody. It might be an over-engineered solution or an over-engineered project. And in the instance of complexity, what we want to try to do is simplify the process, simplify the work. And then ambiguity. We don't have enough data. We're not sure what to expect, right? We have a lack of knowledge. We've gone into an area that we're uncomfortable with. And part of that can be driven by the fact that we're doing something that we might be used to be, we might be used to doing it, but we don't really, we haven't been collecting data on it. We don't know what's driving success. We don't know what's driving problems in a project, in a business. I think a lot of businesses that we worked with in the past haven't really have scoreboards or key performance indicators. So haven't been collecting data. They've just been doing, and they've been doing it potentially very well. But there is ambiguity in those particular situations. So something about VUCA that's interesting is that when it's at the leadership level, at the executive leadership level, in this case, perhaps at the ownership level, if you don't have a deep bench of management alongside you, these things defy, actively defy confident diagnosis. So as executives and managers, we want to be able to see into something. We don't want it to be a black box. But something about the VUCA, the shifting in a VUCA environment, the sort of speed that it can move in really makes us uncomfortable and not very confident in diagnosing exactly what it is that we're dealing with. And it's often befuddling to executives. Things that have worked in the past may not work now or on a very short horizon in the future. So it's a difficult environment. I would describe it as an adversarial environment, even a hostile environment. And the bad news, I suppose, is that data shows that VUCA is intensifying. In 1985, it was noticed. In 1990, the U.S. Army started using it actively. It's continued to get more and more intense, more and more sort of, you know, impactful for businesses and more and more difficult to manage from the executive leadership point of view. Part of the contribution there is what we call the agony of ever-increasing pace of change. I think we all deal with that personally. I think we deal with it in our business. It's difficult enough, and now things are moving so fast that you can hardly keep track of it. The COVID-19 pandemic, for instance, is a good example of an area that's very difficult for a lot of businesses to manage. And now look at what's happened just in the last, it seems like just the last few months when AI has burst on the screen, and we're all trying to figure out exactly what it is that that's going to do to our business. Has it increased risk? Has it disrupted our business model suddenly? Has it created opportunities? These are things that are difficult to deal with, even if you have enough time. All of a sudden, we're dealing with something that's moving extremely quickly and could have a highly disruptive effect one way or the other. It could be good, bad, combination of the two. You'll see VUCA in a lot of different ways in your organization. So it's not just about planning, right? It's not just about strategy and trying to figure out what's going to happen in the future, it'll show up in things that are happening today if you look closely enough and find it. So it could be in projects and project scope. It could be something in outcomes. For instance, we thought we were going to get one outcome. We got another. What happened there? We've even done this type of project before. We've been using this process reliably for a long time. And all of a sudden, we got an outcome that we didn't expect. What's going on? You have to stop and ask that question. And you want to manage that risk going forward. Just general performance of the organization, performance of people, financial performance going to show up there. Technologies. Again, pace of change is something that we're all dealing with. But it's also significant investment risk. It's significant adoption risk. I don't know if you've ever been through a software changeover, accounting system, operating system, communication system, whatever it might be. Those things are difficult to do and just packed with risk. But in order to keep up with the world that you live in, you've got to do them. You've got to invest in those things. Otherwise, you fall behind. And remember, go back to those three ways to increase value. The fact is, if you fall behind, you're not best in class. And anybody looking at your business through the eyes of an investor, for instance, which we encourage you to do, is going to see that right away if your technology is outdated. What are the stakeholders? In the stakeholder system, you've got internal stakeholders. Those may be owner shareholders. Certainly, the employees, the management team, leadership team, every other employee in your company. You've got vendors. You've got folks that you sell to, your customers. So all of those folks are stakeholders. You've got other stakeholders as well. The bank, for instance, is a stakeholder in success. So all of these parties in your ecosystem can be affected if you are unable to manage the risk in your businesses effectively. And then interdependencies. As I mentioned earlier, you could see risk over here and manage it or don't manage it. And it could create risks in other parts of the company. The other thing that can happen is it can kind of flow back upstream, if you will, where an unmanaged risk in one part of a process that occurs later can create risk in an earlier part of a process, especially if those parts are interdependent. And if they go cross-departmental, like into, so to speak, in silo to silo, you may not have the ability to see that there's a risk happening over here. But all of a sudden, you're seeing it show up over here. You may not have realized, even until you see it happening, that those two things are pretty interdependent. So then you have to intervene one point or the other. And with poor communication in your organization, potentially, you may not understand what's happening. And then organizational issues. When there is stress in an organization, when it can upset the structure, it can create volatility in the labor force. It can create poor communication, problem solving, and collaboration, and suffer. Stress behaviors start to show up in high-risk environments. And people make bad decisions when they're stressed. So it can have direct impact on the way that you operate and on your organizational cohesiveness. So here's an interesting point. We've been talking about all of the pressures that can come from VUCA, kind of putting pressure on your core operation, putting pressure on stakeholders in the other parts of your ecosystem. But a well-known and really major source of risk is our own brain, the way that we see it or don't see it, the way that we interpret risk, whether we act on it or ignore it. And I want to just walk you through some of the things that we refer to and that you've heard of, I'm sure, called cognitive biases. And we're just going to cover a few of them because I think it's interesting the way that we, as humans, actually impact the risk profile of our businesses. So our brains are really wired to seek safe environments. We're not comfortable, as humans, just always being at risk, right? And even in business, we really crave, we value predictability. These are strong desires. These are things that can guide our decision-making and really guide the way that we live our lives. So they can also bias our decision-making. We may react to something kind of down there in the lizard brain part, the fight or flight brain part of our brain. We react quickly to something that we may interpret as a threat instead of taking a breath and responding to it in a very structured way. Reacting and responding are two very different behaviors. They engage two very different parts of our brains and they are two very different pathways to problem solving and collaboration. In a VUCA world, really only a certain level of both of those things, the reaction and the response are available to us because we're always kind of going towards safety as quickly as we can. Our instinct, when we see those things that threaten our needs is to dismiss them cognitively, to compartmentalize them and make sure that we don't have to necessarily deal with them. Now think about supply chain managers, right? So if you have to manage a supply chain for a living, your whole job is about delivering predictability. So VUCA environments are super difficult for supply chain managers who are trained not to be in that kind of environment, have trouble in that kind of environment, doing their job, which is essentially to create predictability within an organization. So if you were a supply chain manager, think about what was happening during VUCA, how stressful that must have been when their job is to create predictability, but VUCA effects are making it almost impossible for them to do that. And their brains are trying to figure out how to get back to a safe space, what kinds of cognitive biases might come into play there for supply chain managers and others in your business. So cognitive biases distort our ability to make good decisions and making good decisions quickly at what we call the point of performance, which is as close to the action as possible, right? You don't want all the important decisions to be made by the leadership and executive team. You want them to be made quickly, right where people see them on the floor, so to speak, or in the field so that they don't have to keep pushing it back up the chain that slows everything down. And leaders and managers may not make the best decisions compared to the people who are seeing a problem in real time. So making good decisions quickly at the point of performance is really a crucial risk management tool. It's also an indication that an organization can solve problems well, again, best in class performance, and they can collaborate on problem solving. So it's not siloed off to, hey, I don't have the authority to make that decision, so I'm going to push it up to a manager and it might even go all the way to the desk of the owner. Well, that's just, that's not a best in class organization. So those are indicators of a high value organization. So let's talk about Black Swan events. This is part of the cognitive bias conversation. So Black Swan events are things that are highly unlikely, but they have a huge disruptive impact. And some examples might be, you know, the financial crisis of 2008, hurricanes, natural disasters, persistently high inflation. Think about how many of these things we're seeing these days. COVID was a Black Swan event, I think. Rapidly increasing interest rates after, you know, I don't know how long it was, probably 25 years of seeing very, very cheap money all of the time. Now, all of a sudden we've seen a pop in the interest rates and everybody's kind of freaked out. I've never actually worried too much about interest rates. I'm more worried about the banking industry restricting credit. That's usually when the pain comes in the economy. What happened in 2008 and the results were not great. So in Black Swan events, we tend to want them to absolutely go away as quickly as possible. And we don't want to deal with them. We don't want to see them coming because they are so hugely disruptive initially. But the pain, although it is acute, it is temporary. And that's an example of where reaction versus response is going to be really important in your organization. So we want to make sure that we're responding rather than reacting. We don't want to pursue permanent solutions to what will turn out to be a temporary problem, right? So, and if we consider the consequences of our actions, take a breath, respond, figure out what we're dealing with, interpret it correctly, try to get out of the cognitive bias of reaction to a Black Swan, we're actually going to do a lot better compared to peer companies that don't do that. I think that's important. So again, best in class, best in class organizations don't react, they respond. So here's some other examples that are going to show up of cognitive biases in the management of the company, wish-casting. So we see wish-casting all the time, and here's what it is. It's the act of presenting a wish as a forecast, despite clear lack of evidence to back up the wish, right? So you can see that in financial forecasts sometimes, or in customer forecasts. We're wishing the result that we want into some kind of reality when the data absolutely tells us it is very unlikely to happen. Conservatism as a bias, that's emphasizing old information, pre-existing original information over new data that we're receiving close to the action. And what that does, it makes us slow to react, right? So we're getting data that's almost real time, but we're saying, oh, we don't like what that's saying. We're going to kind of go back to a time when we feel like the data was more accurate, and we just don't react in time to manage that risk. Base rate neglect is actually the opposite of conservatism. So we're going to then emphasize brand new information, even though it's less proven, and the older information has a lot of data, and it's backed up in ways that should make us more confident, but all of a sudden we're getting new stuff and reacting to that, again, react versus respond. Confirmation bias, I think we've all heard of that. That's the sort of common behavior, I think, among all of us to seek only the information that confirms our pre-existing beliefs or conditions and to ignore everything else. You see it every day in the news, right? So sample size neglect, it's the tendency to infer too much from too small a set of data. Hindsight bias is really about the results that we got were reasonable. They should have been expected, but we only saw them looking back after the fact. And when we look back, we say, well, yeah, we probably could have seen that coming if we had been paying attention. That's actually a bias. That's not necessarily poor systems or performance. It's a bias that we have in our brain, again, to seek safety rather than just sort of say, this is the most likely outcome. We need to manage it proactively. It causes us to overestimate the forecast and underestimate the risks. Recency bias is about future probabilities. So the future probability is skewed based on memorable events that happen. So a good example, this is kind of a funny example, I think, is a shark attack, right? Shark attacks are actually really rare, but if we see an attack in the news, we see it as a current threat all of a sudden. Our assumption is when we go to the beach, there must be shark attacks happening all over the place, but that's just not the case. And then framing. This, I think, is a really important one because the way that we frame something up, the words that we use trigger responses and reactions in our brain. So it's really about processing data based on the way that the data is presented. So here's an example. If someone, if you were to receive a cancer diagnosis, for instance, and they said, with this cancer, there's a 20% death rate, right? There's 20% terminal rate. What they're really saying, when you deliver that, you might say, oh my God, I've got a one in five chance of dying. But if they delivered it as there's an 80% survival rate, your reaction is, I have a four in five chance of beating this thing. So the presentation of the same data in two different ways triggers a very different kind of response for us. So we can reframe VUCA in some important ways to get our brains to react differently. In other words, to get more towards respond and further away from react. And we do that by asking more open-ended questions. So let me give you some examples. Here's one for volatility. Let's assume that we're working on a project. So all of these examples are really within the framework of managing project risk. So here's a question. What can we do? Notice team approach collaborative. What can we do to ensure that the contracts related to the projects are really solid and that they're made to be durable throughout the duration of the project? That's gonna reduce volatility. Again, we're gonna get hopefully an expected result from the people that are supposed to provide services to us. So clear outcomes and expectations, pricing, all those kinds of things, no surprises. Uncertainty. What will it take for us to have a really defined, really well-defined project scope, right? And something that the stakeholders in the project have all bought into. It's been communicated. Everybody knows why that scope is important. It's not too big. It's not too narrow. We've really spent a lot of time in the organization making sure that everyone understands what it is that we're gonna do in this project, why we're gonna do it, why it's important to the organization, what their role is going to be, and what we all expect to see. Complexity. What can we learn from previously successful projects that we've done in this particular area and how we're gonna use that to, importantly, hear this, please, simplify the work? The projects are over-engineered all the time. Too many steps, too many people involved, too many decision points. Not clear which steps happen first, which steps are supposed to happen later. Hasn't been mapped out visually. Whatever that might look like. If you put a project up on the board and you see a thousand boxes that have to be attended to at any given time, it is way too complex to actually perform. So what can we learn from the past to simplify our work in the future? A lot of times we're really busy and we forget to stop and kind of do an autopsy, I guess I would call it, debrief a project and learn from it, and then put that knowledge into our base and share it throughout the organization. So there may be a few people who have talked about it. Maybe there's a little kind of information puddle, if you will, in the organization, but we forget to put it into our knowledge set and socialize it in a larger set of people who are gonna need to use it in the future. And then ambiguity. Simple question. Are the deliverables on this project really well-defined, right? Are they, and have we handled what we would consider to be the unknown unknowns, right? To quote something that probably confused us all when we heard it from Donald Rumsfeld, gosh, 25 years ago. But it's important. Have we really sat down and talked about what we don't know that we need to know? And covered, you know, brainstormed about it. Maybe even got ridiculous about it to try to come up with things that could impact the deliverables of the project. By asking these open-ended questions, we've engaged a part of our brain that's more in the respond category, risk response, than react category. We've allowed ourselves to get out from under some of the biases that are going to show up when we are in a stressful VUCA-related environment. We can expect bias, we need to manage it. There are also some other necessary VUCA survival skills. So one is resiliency, resiliency in people, resiliency in thinking, and resiliency in the organization. So the definition of resiliency is really, it's a fundamental aspect, in my view, of small and medium enterprise risk management, right? So we're talking about medium-sized businesses, small businesses, not giant publicly traded companies that are in a little different category. So simply put, resiliency is the ability of an ecosystem, whatever that ecosystem might be, to absorb a shock and return quickly to its original condition or a better one, and to do it really quickly if possible. So it's like a bounce. Something hits you, bounces off, glances off. How quickly can it have an effect? How quickly can you return to a state of normal operation? And then incrementalism is another survival skill that's necessary. What this means is don't place long bets. So you're gonna take kind of on a regular cadence of small steps and decisions, rather than making giant decisions. In a VUCA environment, you can almost be guaranteed that the environment that you're making a decision in today is gonna be very different in 30 or 60 or 90 days. So you can make no assumption that what you do today is still gonna weather the storm a year down the line. That's why doing strategy on short cycles, very agile kind of strategy is important in today's environment. It just can't be any other way. So small steps are also much clearer for task performers. It doesn't cause them to resist big changes in the organization because they can see that they can be digested. So for instance, what I would say maybe about a software changeover is you don't really, if you're trying to do a software changeover, you have to do it incrementally. You have to do it in small steps. You have to be able to allow people to get a part of it and adopt a part of it before you can just do a giant changeover in a short period of time. Small changes can also allow people to see achievements quicker, right? So quick wins, let's call it. So if you take a small step and you say, look, we wanna see a win in this particular area, it's not as overwhelming in the employees. The team members are likely to see it and get excited by that. It gives you that adaptability and flexibility that you need. It gives you that level of agility, which is absolutely necessary in today's world. But here's a weakness. By taking small steps only, it can lead to kind of a fragmented approach, right? One that leads to what we might call strategic drift. So you have to be careful that you're not getting too siloed off and the steps are so small that they don't have as much of an impact as you would hope. It's a skill. You have to develop it over a period of time. And then professional planning is really important as well, but you have to do it in a way that allows you to plan for many different scenarios. So planning is no longer a kind of A to B line of we're at 10 million in revenue and we're gonna get the 15 million in revenue. It's 10 million to 10 million one, 10 million two, 10 million three, short cycles, smaller steps, and then many different scenarios for managing the risk. There is something actually called enhanced VUCA leadership. These are leaders that have learned to survive and thrive even in a VUCA environment. And here are some of the things that if you're hiring a leader, you need to be looking for. First of all, evidence that they are comfortable bouncing back quickly from adversity. Something bad happens, they don't react to that. They respond to that. They're not freaked out by it. Ultimately, the leadership in that particular area is gonna turn down the temperature in the organization at a very risky time. And it's gonna let people know that, hey, the leader brings the weather, is really capable of managing this company through it. It breeds confidence and it also promotes a different kind of behavior in the organization. They need to be able to thrive in challenging circumstances. So if you're hiring someone, you need to see evidence that they've done that, right? Not just that they can talk about it, but what kinds of challenges have they met? What kind of challenges are they comfortable with so that you can see that they like managing in challenging times and circumstances rather than shying away from it and wishing it just wasn't the case. And then they have to be agile. They have to be really comfortable with these short cycles and agile planning. And the impacts, the implications of that and consequences in some cases on the organization. I'm gonna suggest that we flip the script here, that we use VUCA as a different kind of acronym and make it more positive. So how can we use the V? We can counteract volatility with vision. So we can define as leaders and as owners, we can define what our vision is and then we can provide context for it. It's not just an idea. There's a reason why we have this vision, why it's important and where it might be going in the future. So that's gonna reduce not only volatility in the performance of the organization, it's also going to help people feel less volatile in the brains, right? There is a guide here. There is a point of us coming to work and doing the things that we're doing. We buy into the vision. Understanding, right? We can reduce uncertainty by providing our organizations with better understanding, better direction where we're going relative to the vision and the context for that vision. We can provide clarity to overcome complexity. We can set good priorities. We can define what acceptable outcomes are. We can document those things and we can help people get there. And then finally, in terms of ambiguity, as we've been talking about a lot, if we're agile, if we can use agility as a tool and use it well and plan and execute incrementally, the ambiguity that we're managing is in little periods of time, rather than being overwhelming environment of, boy, we just don't know where to go with it. Well, fine, let's figure out where to go with this in the next 30 days and manage risk in that period, rather than trying to manage risk over a five-year period. I am not a fan of planning over a three to five-year period. In today's VUCA world, it makes absolutely no sense to do that. It's a useless plan. It will change in a blink of an eye for many different reasons. So you just have to get used to managing the horizon on a much shorter, in a much shorter, more agile way. So here are some ideas for you to embrace VUCA thinking, things that you can do in your organization that might be helpful. So one, simplify your work, right? Look for opportunities to take steps out of the process. It doesn't matter whether it's steps in collecting money. It doesn't matter whether it's steps in running a meeting, communicating, training, whatever it might be, access to information. If you were to map the process out on a board and put all the stickies up there, all the steps that need to be made, I think what you'd find is there are redundancies that can be taken out of the situation. For instance, if something is done right the first time, why would you have to have somebody check it in order to make sure that it's right? Get it done right the first time. You don't have to have sign-offs down the line. You're slowing things down. You're introducing the opportunity for mistakes. So simplify the work to the extent that you can. And when you're planning the work, resist the temptation to over-engineer it. We over-engineer projects. We over-engineer processes. To a certain extent, what we're doing, I think, is trying to create safety for ourselves, the assurance that everything's gonna be okay by putting in these extra steps, these checks and balances. But the fact is we're just creating complexity. So simplify. Use VUCA. Let it show up in your organization. So try it out. In one of your next risk assessment meetings or strategy meetings, put it on the table and say, what kinds of questions can we ask within these four areas to help us learn to manage risk in an environment that isn't going away, that's actually getting worse, becoming more intense? Embrace it. Let it show up in the organization. Use it. Put some type of risk management in your operating budget. Have a line for risk management. It can be risk management meetings. It can be rewards for good risk management, whatever it might be. But let it show up there because once you put money attached to it and you begin to invest resources in risk management, I think the organization starts to manage it better. This makes sense. Embrace the incrementalism. The 30-30 rule is pretty simple. We use it all the time with our clients. So it's basically, what are we gonna do in the next 30 days? And then we get to 30 days and we look back and we say, what did we get done? Did we get it all done? No, we didn't get it all done. What's missing? How can we help each other be more successful in the next 30 days? What do we need to add to the story and get done? Basically replacing the things that we did achieve in the last 30 days. And we use that, it's almost like a sine wave, right? We're doing, we're doing, and then we're very quickly moving on to the next period. So these are short curves and it allows us to make sure that we don't get six months into something and then go, oh, if we'd been on a shorter cycle, we would have seen that we were getting off into a bad path five months ago, but we let it kind of fester in the organization. There'd be a variety of reasons for that. So embrace that incrementalism, smaller bet. Become more aware of your cognitive biases. When I gave this presentation to AAD Conference in Chicago, someone rightly asked a great question, how am I supposed to overcome cognitive biases in my own brain if these are things that really humans are prone to, right? Because we're seeking safety. And my answer was, you just have to watch for it. You have to be aware and kind of keep in your mind, hey, I could be biased on this. Let's stop, step back, take a look at the data. Evidence-driven decision-making is important. And then make sure that I'm thinking of it in as objective a way as I possibly can. Invite the team to put in their perspectives before we make a decision. But remember, speed matters. This is an accelerated environment. You're not gonna be able to take it. Take forever to make a decision. You need to make it quickly. Evaluate your company's resiliency. And a good way to ask that is, where are our weak points? Where are the failure points in the organization that under really hostile circumstances, it would break? Right, and we're gonna go there first. We're gonna make sure that those weak points are really shored up and then make sure that if something does kind of get into that space, really impact us. Good example might be a cyber security threat of some sort, right? So if you do a risk assessment on your technology, you find out, hey, we're not managing our passwords well, or we have security problems in our sort of, you know, our computer system, our network. We're gonna tie those things up. And then if we do get attacked and something happens, what's our strategy for redundancy? How are we gonna bounce back from that quickly? Who's managing that risk on an ongoing basis? Need to assign someone to actually be responsible for that, because that's certainly something in that hindsight risk. You know that there are weaknesses in your system and you don't do anything about it. You get attacked, you know, you have a cyber security attack or some kind of disruption. Your hindsight bias is gonna go, well, then we should have expected that actually. We could have fixed that earlier and it wouldn't have been expensive, but now it is. Now we've got a bigger problem that we have to deal with. And then I would encourage you to really find and invest in leaders. If you can't find them, then pick some people in your company who you want to develop into those VUCA leaders, right? People who have the ability to thrive in challenging circumstances and have those enhanced VUCA skills, the enhanced resiliency and perspectives that are gonna be important. If you are an owner who is still an active manager in your business, consider what your skills might be because people are gonna look to you as an example. I said earlier, owners bring the weather, leaders bring the weather. So you need to, if you feel like your skills are falling short on the VUCA side, you know, get some training on risk management, talk to people about how they might be managing risk in their organization, get used to it and be the example for the other leader. Here, I'm gonna leave this up for just a minute for you. So this is a QR code, obviously, take your phone out, take a picture of it. It's gonna take you to something that we call the spotlight assessment. It's 12 questions, it'll take you about 10 minutes maybe to fill it out, very simple questions. And it's gonna do a number of different things. It's going to identify some of the good stuff based on your questions that's happening in your organization. We would call those value drivers. It's gonna identify a few things that you really could pay more attention to and those might be value killer. Simple recommendation, things that you can probably do yourself. It's gonna bring up some red flags that's gonna fit into that sort of, hey, if you really wanna work on some stuff, here's the stuff that's gonna really have the most impact in your organization. And generally that's about fixing problems rather than enhancing the drivers in this particular assessment. And it's also interestingly gonna give you an indicative value range for your business that's based on your industry. It's gonna ask you what your industry code is, gonna benchmark it against what's been happening in businesses transactions, gonna pull out a database and it's gonna give you an indication of value ranges, revenue multiples in your industry and also earnings multiples in your industry. You're kind of getting an interesting sort of a couple of different ways to look at it. One, what's the risk that may be driving value or killing value in your organization? And then also how are other companies that have actually sold, what does the data say about the range of value and how it's being calculated? So you get that multiple of earnings piece or multiple of revenue, you also get risk and then you can decide what you need to work on in the future. When you go there, it's gonna ask you for a discount code, use AED23 and you'll get the assessment for free. Here's my contact information, if you wanna reach out to me, our company website, readyfornext.com. I have a partner, Sean Hutchinson, john at readyfornext.com. My cell phone is on there and there are the locations where our businesses are operating out of, our advisors and offices. I'm in Denver, Colorado, so reach out anytime. If you'd like to have a discussion about what's going on in your business. So I don't see any questions in the Q&A. If you'd like to pop something in, we'll give it about 30 seconds here, but I really appreciate the time that you put into this, you're listening today. I hope this has been helpful to you. I would encourage you just to, even if you just use the strategic operational, financial, reputational, regulatory risk framework, do a brainstorming session with your team to try to get all those risks on and do a likelihood and impact scoring. And then think about how you can use and benefit from VUCA thinking, VUCA-based thinking in the operation of your business and also the management of your business. So thanks a lot. Thank you, everyone, for attending the webinar. Have a great day.

VUCA

managing risk

reducing risk

increasing value

risk classifications

VUCA thinking

resiliency

professional planning

Spotlight Assessment