RISK MANAGEMENT FOR SMALL TO MEDIUM ENTERPRISES

What is risk management?

As a small to medium business owner or manager, is risk management something you think about or do you even think it applies to your business? What is risk management anyway? In fact, what is risk?

Risk can be considered to be ‘the effect of uncertainty on your business objectives’ and it is an inherent part of being in business.  When you make investments in your business the hope is, that they will generate a positive return, but that return can be negative, positive or even far beyond your expectations.  It is that type of uncertainty that we would call risk.  The management of risk is concerned with reducing business uncertainty and the impacts arising when risk events do occur.

 “It seems to be a law of nature, inflexible and inexorable, that those 

   who will not risk, cannot win.”

- John Paul Jones

The greatest challenge for small and medium business owners is to find the proper balance between risk, peace of mind and profitability.  Trying to completely eliminate risk from your business is unrealistic and can be prohibitively expensive or cause you to institute policies that may be so risk averse that your business never grows.  Gauging the correct level of risk will position a company to grow and be robust enough to withstand adversity. 

So where do I start? - Identify & Assess

Risk management can be very complex, but it doesn’t have to be.  The first step is to take a very honest and thorough look at your company and then to identify and evaluate the risk events that could impact it.  Here are some of the questions that you should be asking:

• Do I you really know our business objectives beyond mere profitability? 

The strategic objectives in your business plan are a good starting point here, but you need to think about those business objectives that support your strategic plan.  Consider things like:

• Your ability to attract and retain the right staff
• Business processes
• Workplace safety
• The environmental impact of operations
• IT Systems
• Your relationship with suppliers and customers 
• Regulatory compliance.

• What types of risk events can impact our objectives?  

This involves identifying the risk events that can specifically affect your objectives and assessing both the likelihood of occurrence and the impact upon the organization.  This goes beyond looking at the downside, the catastrophe, or major issues that can hit your business. You also have to look at what new sales or growth opportunities are out there and the risk of not achieving them or the risks of not achieving them well.

• How can I deal with our risks? 

We all deal with risk every day and the same strategies we use in our daily lives apply in the business context as well.  If we decide that a motor vehicle accident is a risk event that we wish to manage then we can control or treat that risk in a number of ways: We can decide to drive during a snow storm and ACCEPT the risk of an accident or AVOID the risk by staying at home.  We could put winter tires on our car to REDUCE the likelihood of an accident.  We buy cars with safety systems such as air bags to REDUCE the consequences of the accident.  We purchase insurance to REDUCE the financial impact of the accident or we could take public transit and TRANSFER the risk of having an accident.  

The same principles apply to risk in a business context.  The approaches of acceptance, avoidance, transfer, reducing the likelihood and reducing or mitigating the consequences, form the basis of risk management policies and treatments which can be used individually or in combination.  You should decide how to manage the identified risks to fit within your risk tolerance and resources available.  Most often a combination of approaches is the most effective.

• Peace of Mind vs Profitability?  

In the risk management world, this is often referred to as ‘risk tolerance’.  Remember you cannot eliminate all risk, so you must decide how much risk your business can accept.  Achieving the correct balance is at the heart of risk management.  

These questions are the basis of the complex ISO 31000 risk management standard used by large companies to manage ERM when dealing with complex and dynamic risks.  This simplified process should, however, provide the tools and insight, not only to allow you to quantify your risks but also your position your strategic business plan to be more resilient.  

What’s next? – Monitor & Review

Now you understand your business objectives at a comprehensive level, you have identified the risk events that can affect the achievement of those objectives, you have decided how to manage those risks and now you can sit back and run your business?  Maybe not!  To be effective, risk management should be a dynamic and iterative process, your business doesn’t stand still and neither does the environment in which you operate.  To be truly resilient you must take it a little further.

Monitoring your competition, customers, suppliers, technology and changes in the law or regulations and will provide early indications of changes in your risk profile.  Perhaps you may consider establishing some key risk indicators, such as commodity prices, competitor pricing or currency exchange rates.  When these indicators fall below or rise above your indicator levels, certain actions may be initiated.  For example, lower fuel prices may prompt a shipping company to consider highway transportation for longer hauls, but at what point does it become more economical to switch to the railways? Similarly, the fluctuations in the exchange rate for the Canadian currency may influence where a manufacturer sources raw materials or what market in which to concentrate sales activity.

Taking a few days periodically to review and update your risk management plan is a wise investment.  The review should involve multiple levels of management from within your organization and (if warranted) a risk management consultant, to provide insights and perspectives that you may not have considered.  To identify new and emerging risks ask questions like:

• Will a change in operations, or the addition of new equipment create new risks or change     existing ones?  
• Will a new supplier or customer change your supply chain risk? 
• Does a fluctuating exchange rate present a commodity price risk or an export opportunity?  

Having recognized that change may be occurring, an evaluation of your risk management plan is recommended.  Are your policies and internal controls at the right level? Are you reaching your target market or have new markets become accessible and if so what new risks may arise? Do you have a plan A, B and even C if things change unexpectedly?  Do you have a business continuity plan if you are faced with a catastrophic event? And finally, is your insurance coverage appropriate for your business today? 

What about insurance? – An Essential Component

When many business owners think about “risk management” it’s usually limited to purchasing standard insurance protection without much consideration for other ways to protect the business. Insurance is an essential part of any risk management plan but you must understand its limitations.  Insurance can mitigate the financial consequences of a liability claim or of a loss event such as a fire, or windstorm or even a major operational loss if you have business interruption coverage. But insurance will not reduce the likelihood of a risk event occurring nor will it help manage risks that are uninsurable such as supply chain risks or strategic risks.  

The optimum level of insurance is attained when your insurance is structured to provide your desired level of coverage, specific to you risk profile at the lowest possible cost.  This will raise the question of how much risk can I can accept?  You may be able to lower your premiums by accepting a higher deductible or you may decide that you need a higher level of liability coverage to do business in the US.  This comes back to that question of peace of mind vs. profitability. 

The coverage and policy limits offered by your insurance should be reviewed at least annually as your business develops.  It is important to look at the detail of your policies to make sure that you are not paying for coverage you don’t need and to confirm that the policies limits are reflective of your business today.  If you merely renew your policy every year you run the risk of misalignment occurring between your expected level of compensation and your actual policy limits.  Factors that lead to misalignment include changes in the cost of building or equipment replacement, changes in the size of the entity insured, business development into new markets and new or emerging risks.

 “One thing that makes it possible to be an optimist is if you have a contingency plan for when all hell breaks loose.” 

-Randy Pausch

Insurance is often considered to be a risk transfer mechanism but this is only correct insofar as it transfers the financial impact of a risk event to the insurance provider.  Insurance is most effective when it is combined with activities that reduce the likelihood or occurrences, mitigate the impacts and business continuity planning that can provide for rapid recovery.  For example in the event of a major fire at one of your facilities, your insurance will provide with the financial resources to rebuild or restore operations, but a business continuity plan will give you the roadmap to business resumption, allowing you to recover quickly.

It’s up to you – manage the risks or accept them?

There is no ‘one size fits all’ strategy for risk management.  Every industry has its specific risks and every company within an industry has its own unique risks based on its culture, maturity, market position and so on.  The amount of risk management activity each company undertakes will be different as well.  It could be as little as an annual review of insurance coverage and consideration of key business risks for a sole proprietorship, or as comprehensive as a department with a large staff managing claims, insurance and daily monitoring of key risk indicators for a large financial enterprise.  

For you, however, taking these few simple steps can kick start your risk management program and help you define and align your risk appetite with your strategy and the way you operate your business.  The end result is that you should have a business that is positioned to take advantage of opportunities when they arise and one that is more resilient when adversity strikes.  

 “Good Risk Management fosters vigilance in times of calm and instills discipline in times of crisis.”  

  - Dr. Michael Ong

Ivan R. McClelland LLB, MBA, P.Mgr. CRM

OLYMPICS, GOOD OR BAD?

Properly hosting an Olympics Games can be a real boom for the host country, province and cities. That said, the “how” and the “why” are critically important.

Many people are surprised to learn the real benefit is not in the 16 days. The actual competitions shine the world’s spotlight on the host community, but the real benefit is in the process, the profile, the future and the legacy. Understanding what can be achieved and setting out a path to get there is imperative. It is about leading and a legacy of attention. The “home run” happens in the future, after the “Games”.

Those who forget these basics and champion events that cost too much create controversy and fail their communities.

Frank King eloquently said almost 30 years ago, “When enough people believe, the dream comes true”. He was speaking to the qualities of enthusiasm and engagement - which are eventually the roots of  any successes.

All international events should be pursued on a similar basis. Is the community prepared to dream and be the best that it can be? What are its aspirations; and how they can be achieved by taking on this international  opportunity?

In Calgary, this is now the subject of important study and analysis. It is the next step, and it is not easy work. It must be viewed from many perspectives - the City, the Province, and the Country. But those will not matter if is does not first satisfy the aspiration of sport and culture, as those are the foundation of an Olympic Games. And the analysis must not forget about the needs of the Canadian Olympic Committee and finally, the IOC and international sporting federations. Thankfully, the IOC has recently made changes around expectations and processes. What might not previously been a compelling case, now might be possible.

I’m exited the City of Calgary is prepared to look at the merits of a bid and further, that they have committed resources adequate for the analysis to insure it meets its needs. Our “next” generation is ready to take up the challenge and I hope they are given the chance to show the work the greatness of our people and the majesty of our little corner of the world

The real opportunities will follow this step, its work and study. Our Osborne team has the experience to help businesses explore and then implement plans that can be beneficial to the eventual organizing committee. Exciting times ahead!

Russ Tynan (click to see Russ’ profile)

Principal

Russ Tynan has worked in significant roles on two Olympic Winter Games (1988 & 2010) and provided counsel to two other Olympics (199 and 1994) and another international sporting event held in Canada (1994).

LEISURE TRAVELLERS DRIVING THE TOURISM BUS

In my January newsletter article “2016 Outlook – Hospitality and Tourism”, I forecasted this year to be another economically challenging one for the tourism sector, even with a few favorable conditions existing in the market. A weak Canadian dollar will incent Canadians to travel their own country more and will motivate the American traveler – our number one international travel market - and other foreign visitors to make Canada their 2016 destination. Also, with lower fuel prices lower travel costs will provide travelers some relief at the pump for the important “rubber tire” market. However, my prediction of 2016 duplicating the poor results of 2015 was based on an expected drop off in business travel due to the Oil and Gas economy.

This forecast was not a difficult one to make and I certainly wasn’t the only person projecting this type of year; and so I am not suggesting I am this generation’s Nostradamus or that I will be spending more time looking into my crystal ball. However, I do believe that with the Calgary Stampede upon us, and as we enter the third quarter of the year – tourism’s highest revenue quarter – it might be healthy to look at our vital signs and see how we are doing!

Alberta GDP growth projections in the first quarter of 2016 were all negative by four leading institutions: ATB Financial -0.5%; Scotiabank -1.9%; RBC -1.6%; and the Conference Board of Canada -1.1%. The Canadian Tourism Research Institute forecasted in 2016 growth of Overnight Pleasure Travel by Canadians of 1.6% on top of the 0.7% growth estimate in 2015. Business Overnight Travel by Canadians was projected to rise 1.8% over 2015 but that is based on an estimate of a 6.3% drop in 2015 performance to 2014. USA Overnight Travel and Overseas Overnight Travel were forecast to rise 3.8% and 4.1% respectively. Combined, Total Overnight Travel visits were estimated to increase by only 0.3% in 2015 and 1.9% in 2016, with these small growth projections being driven by leisure travelers.

In January 2015 and February 2015 the West Texas Intermediate price per barrel in US dollars was $47 and $51 respectively. In January 2016 and February 2016 the same measure was $32 and $30 per barrel – an average of 36% drop from the previous year in these two months. In January 2015 and February 2015 the RevPAR (Revenue Per Available Room) in Alberta was $75 and $86 respectively. In January 2016 and February 2016 the RevPAR was $55 and $63 – an average decrease of 27% in revenue per room for these two months. There is a direct correlation in hotel performance related to the Oil and Gas sector performance, and while leisure tourism growth helps to offset business travel decreases, it cannot match the high yield of business travel for hotels.

Another factor we are seeing in 2016 is the ongoing increase in hotel room supply. New hotels, like the Hilton in East Village and Marriott at the airport, on the heels of new hotels opened last year, are increasing significantly the amount of hotel rooms available to travelers at a time when demand is flat or diminished from previous years. This puts tremendous pressure on hoteliers to maintain rates in a very competitive environment. Tourists, whether for leisure or business, are the beneficiaries as room rates drop and hoteliers struggle to keep RevPAR at budgeted levels.

Reports suggest that the mountain resorts are expecting a great summer in hotel occupancy. Hopefully room rates will reflect the high demand offsetting the downturn in business travel the other seven months of the year. Leisure travelers are definitely driving the tourism bus this year in Alberta!


Randy Williams (click to see Randy’s profile)
Head of Practice - Tourism, Hospitality and Destination Management


Other Articles by Randy Williams
Organizations Holding a Leadership Position - What Defines Them?
Leadership - The Holy Grail of Business
What Are the Competitive Challenges for Calgary and Canada's Tourism Sector?
Old Friends Not Visiting as Much; But We Attracted More New Friends
Taking a Trip is More Important Than You May Know

HAS BUSINESS CUT OFF ITS NOSE TO SPITE ITS FACE?

The last 18 months have been hard for Albertans, and while the price of oil is on a sluggish rise, we have seen reductions and layoffs in all industries, not just the energy sector, with a slow return to hiring. These cuts will have an impact in a way that has not yet been perceived, with the question being, have we gone too far?

The boom-bust cycle in Alberta is nothing new. As a matter of fact, the Baby Boomers have experienced this before, first in the early 1980s, with several others of varying degrees leading up to the current downturn. By all accounts though, this cycle is different as it is expected to be a structural change for the oil and gas industry that will affect how companies do business going forward. However, did companies consider their people asset requirements for the future in the latest cost cutting initiatives?

When one looks at the labour market demographics, as has been predicted for years, it is clear that the retirement bubble is coming. The recent reductions have seen companies reduce their staff significantly at the middle management and senior individual contributor levels. These employees were being groomed to be the next generation of “thought leaders” and to fill the leadership gap that will be created by the impending retirement bubble. Although we may not know for certain when the retirement bubble will burst, a look at labour market demographics, along with the Liberal government’s campaign promise to reinstate the retirement age of 65 from the current age of 67, it is certain that it is on the horizon.

The perfect storm is brewing; as a result of the latest cuts and potential retirements, I see a significant void that will be exposed once the economy starts to turn around. There will be a lack of talent who can effectively step into leadership and technical expert roles. As a result, attracting and retaining the right people will come at a compensation premium. In addition, the changing expectations of Millennials in the workplace will create a challenge that will require companies to either adapt or be left behind in their bid to attract and retain emerging talent.

What most companies have missed is an earnest review of their people practices and employee value proposition in order to support this new reality. Without a serious and in depth review, the next wave in the war for talent could result in a repeat of past mistakes. When the economy bounces back, and it will, the available talent pool will be underdeveloped, with the competition for this labour pool intense. I would expect there to be higher costs associated with recruitment, training, development and total rewards, with companies, as they have done in the past, looking to outside consultants to fill the gap. However, the competition for key talent (employee, contractor or consultant) could result in staffing cost escalations that may price some projects and companies out of the market.

In my opinion, people are an organization’s greatest asset, and like anything that contributes to a company’s revenue, there should be a strategy (short and long term) in place. Companies can look at their labour spend to understand the cost of these assets but, can they articulate the value received and resulting contribution to the bottom line from their people? Companies need to shift their approach to Human Resources from tactical to strategic; only then can a company say with certainty what is an employee’s ROI. At any point in time, a company should be able to:

• Track the amount spent on an employee, whether it’s from recruitment, development, training, rewards and incentives, retirement plans, benefits, vacation packages, etc.
• Know the expected ramp up costs where the employee is adequately trained and contributing, and measure what they are actually achieving with their new hires and promotions.
• See a positive correlation between investment spent on leadership and training and the company’s bottom line.

So, what can an organization do to prepare for what’s coming?

• Ask itself what kind of company it wants to be? An employer of choice? And whose choice?
• Assess company values and culture and determine if it’s the right one for the long term.
• Reassess, or determine if necessary, the company’s employee value proposition so that it attracts and retains the right types of employees, ones who will help the organization attain its long term objectives.
• Evaluate the effectiveness of all employee programs and make changes where necessary.

The answers will be different for every organization, but what remains the same is each company needs to ensure they have the right staffing mix, and one that includes people at all levels, including those poised to fill the leadership gap the next time a boom-bust cycle occurs, which, inevitably it will.


Joel Benjamin (click to see Joel’s profile)
Principal

OIM CALGARY WELCOMES JOEL BENJAMIN TO THE TEAM

Osborne Interim Management is pleased to welcome Joel Benjamin (BA, MBA) to the organization as a Principal. 

Joel is a senior human resources leader who brings deep expertise in executive compensation and total rewards planning, design and implementation. Experienced at developing total rewards programs that align and support the organization’s business and people strategies, addressing the changing realities in the marketplace. Joel brings a strong understanding and consideration for the financial impacts, tax implications, proxy reporting requirements and cost management strategies that an organization faces when developing programs. He is a trusted advisor who works effectively from senior executive through to the field-levels and takes great pride in developing and mentoring other HR professionals. He brings with him an outstanding reputation for working with discretion and professionalism. 

THE STATE OF AGRICULTURE

Someone recently asked me about the state of agriculture. It’s in good shape relative to others in Alberta, although most consumers pay little attention, and take it for granted. 

Before expanding, I want to point out that farmers, one of the first links in the agri-business value chain, in Alberta and across Western Canada are currently seeding their crops. Osborne Interim Management (OIMTM) wishes them and all the businesses that support them, good weather and conditions for planting and the many tasks to follow, which bring us and our families the healthy food we eat. 

If we narrow agri-business’s definition to “food production”, demand in the agri-business sector is solid, with a growing population and diets demanding more protein. Unfortunately the 30% of production, which gets wasted, is part of the equation. Agri-business goes beyond food production though, and the bio-fuel sector is having challenges with the low price of oil, which impacts biofuel’s price. 

These are exciting times in agri-business and the pace of change continues to accelerate and create opportunities. Competition is healthy at all links of the value chain with consolidation a continuing trend. M&A activity has increased amongst the Life Science players with DOW and Dupont merging, and ChemChina beating out Monsanto for Syngenta. 

How crops are marketed is evolving since the CWB lost its single desk position. Farmers now have marketing opportunities not previously available. Technology has connected them with others along the value chain, and they’re able to make personal and business relationships not previously possible. Who thought a generation ago a farmer could be selling direct to brewers in another country, or running their owner micro malt operation, or even taking their malt barley right to their end consumer via a micro brewing operation. 

Many growers have complimentary businesses in addition to their farming operation, and are constantly looking for new business development opportunities. A family processing operation I called on in 1983 is now a global player in their sector. Companies participating in Alberta’s agri-business sector appreciate its relative stability, compared to the energy sector. 

As opposed to the loss of almost 20,000 jobs in the Alberta energy sector in 2016, demand for farm labour is strong. Although the fluctuation in the price of oil and the Canadian dollar impact both the energy and agri-business sectors, consider some additional “moving parts” those in the food production sector must monitor. 

• Inputs prices for chemistry have generally flattened, while fertilizer prices have developed new patterns. 

• Growers employ a range of models to manage equipment costs. 

• Farm sizes continue to optimize as farmland prices increase. 

• Weather is a constant factor. In 2013, the creek I live on was part of a major flood incident. Today, the same creek is dry, and there’s a complete fire ban across Alberta, as fires in Northern Alberta continue to burn. In recent weeks markets have reacted to flooding in Argentina and drought persisting in Brazil. 

• Companies have been created to offer new risk management tools, and agri-business managers are employing different models to manage margins. 

• On the consumer front, Earl’s decision to employ a marketing tactic effectively cutting out Alberta beef producers is one of the more recent examples of the impact changes in consumer preference can have, often based on perceptions. A plethora of new and ambiguous language including “sustainable, ethical, and humane” is replacing established guidelines based more on reality and science. Fortunately, after significant backlash, Earl’s wants to “fix it and make it right”. 

• Policies continue to change with governments and examples include the CWB (grain marketing), UPOV (intellectual property rights for breeders), AB Farm Worker WCB, and ALMA (AB Livestock and Meat Agency) being eliminated in Alberta. How ag research is funded will also change. 

• Technology advances, although international markets can make its adoption difficult. China appears to be warming to GM which many felt they used as a trade barrier, while expert opinions vary on whether growers should use quinclorac herbicide on their canola, and much smaller niche products like Ontario’s ginseng producers are learning a hard lesson from dealing with the same nation on a non-GM front. 

Those in agri-business have much to be optimistic about, and it’s still a “people’s business”, where relationships can have significant impact. Participants should not hesitate to try new approaches if they do their due diligence, assess and manage costs and risks. Trialing concepts using interim or fractional management services such as those offered by OIM, is a great option. Our broad team of industry-proven experts works together to help businesses, whatever their challenge or opportunity is. 

Norm Dreger (click to see Norm’s profile) 
Principal 

NORM DREGER JOINS OIM IN CALGARY

Osborne Interim Management is pleased to welcome Norm Dreger (B.Sc,Ag, PAg, MBA) to the organization as a Principal.

Norm has over 30 years of experience in the agri-business sector. His numerous and wide-ranging positions have included both technical and commercial roles. He has applied his collaborative management style to senior level assignments in Canada, North America, Europe and globally. He’s as comfortable in a multi-national’s boardroom debating strategy as he is leading field staff through successful implementation. Norm is equally adept at engaging with producers and connects with people, asking the right questions to uncover the real issues. He creatively identifies the optimal solutions and effectively supports the associated change management challenges.

CASE STUDY - EXECUTIVE MANAGEMENT

The Client

A 33 year old, 85 bed adult male addiction treatment and recovery centre located in Calgary.

The Challenge

To take over on an interim basis from the previous CEO, stabilize the organization, and lead the process to find and transition to new leadership.

The Approach

The Osborne Principal assessed organizational needs during the first three months as acting CEO. Then, working with a third party research firm and a committee of the board, undertook a through identification and filtering process of over 90 prospective candidates until a successor was hired and in place. During this period of time the Interim was able to reduce expenses and generate new funding for needed initiatives.

The Result

The client’s stakeholders are extremely happy with the new CEO and more confident about the future of its programs. This despite a challenging time for addiction and mental health as demand for services increases and the economic downturn creates funding issues.

UK SURVEY SHOWS INTERIM MANAGERS MAKE BUSINESSES MORE COMPETITIVE

Our UK partners, Alium, recently surveyed 100 senior business figures on a range of topics, including how and why they have worked with Interims. Although the practice of using Interims is more established in the UK and throughout Europe, the views expressed are the same we have been hearing at Osborne in recent years as this concept has become more commonplace in the Canadian business milieu. Seventy-five percent of leaders interviewed believed that Interim Managers made their business more competitive. They pointed to five basic advantages:

(1) Flexibility and Scalability: Organizations that have been forced to cut-back on staffing levels find an agile business model is much more effective in a volatile economic climate. To cover management gaps, promoting internally is not always an option, when the responsibilities taken on are beyond an individual’s competency or when that person’s plate is already over-flowing. They may say yes hoping for a career advancement but in many cases are being set up or setting themselves up to fail. To go outside and hire full time in today’s climate would be like timing the stock market. Is the business priming itself for a correction that may still be many months away? Conversely, if expertise is needed for a specific project, a top quality candidate might not be interested knowing that while on contract they could miss the employment opportunity they’ve been waiting for. Sixty-one percent of business leaders cite “lacking internal capacity” as the main reason for hiring interims.

(2) Specialist Expertise: When business is not going smoothly businesses look for agents of change. Their own staff are often stuck in the old paradigm. One of the most useful assets of an Interim is not what they know about your business, but their experience, expertise and outside perspective that creates real value. Additionally, when you bring in a fresh set of eyes they have no problem sharing what they see, even if some feathers may be ruffled in the process. The performance of younger staff is kick-started as they learn new approaches that aren’t really new but have been refined through the mistakes Interims themselves have learnt from.

(3) Speed: Depending on the C- Suite position that needs to be filled, the search process can be time consuming and expensive, lasting anywhere from three to six months. Even in a market where there are a lot of “candidates” looking for work, the process of filter and selection to avoid a costly turnover later can create more exposure in the short term than a business is comfortable with. Fourty-one percent of  respondents to the UK survey sourced an Interim Manager due to the speed with which they could be  appointed and how quickly they could start working with the business. It is not unusual to see only two weeks elapse between contact with the interim firm and work beginning on site.

(4) Outcome Focused:  Interims park their egos at the door and are skilled at getting to the heart of the matter. They in essence are there to put themselves out of work by effectively completing the pre-agreed work scope.

(4) ROI/Value for Money: When calculating ROI, business leaders weigh the cost of implementing a strategy versus not taking any action. Unlike pure consultants, Interims are executives of implementation. They don’t come with a wide range of benefits and perks and if the business situation changes their contract can often be completed with minimum notice. Interims allow business ownership to add and subtract executive capacity in a cost efficient manner that is attractive to shareholders and stakeholders alike.

Mark Olson (click to see Mark’s profile)

Managing Partner & Principal

Other Articles by Mark

Industry Experience Needed...Really?

All Interim Management Models Aren’t Created Equal

The Courage to Get It Right

The Hidden Potential in any Organization

2016 OUTLOOK - NOT-FOR-PROFITS

The trouble with making predictions is that they come back to haunt you later. However, my discussions with a range of Executive Directors, Board members and professional fundraisers has revealed some consistent points of view which I feel confident about.

It will be no surprise that top of everyone's list is the financial impact our weakened and still weakening economy will  have on the not-for-profit sector. Unfortunately, this is one time when trickle down economics does actually happen and as the corporate funding sources battle with their own significant challenges, community support and donations are already shrinking and will continue to do so. This may mean the disappearance of some smaller charities and not-for-profits whose support base is restricted to one or two energy sector sources who can no longer make the donations.

The survivors will be those who have had a broad base of donors and who have not been dependent on one or two sources for the majority of their funding and who also, perhaps, have many individual donors who are able to keep donating through difficult times. However, one thing that donors have often asked about and may now have to happen as a means of survival, is sharing of services and consolidation of charities who all operate in the same area but focus on different issues. For example, there are myriad organizations dealing with homelessness, and many of them deal with different issues around the same concern. There are several organizations dealing with different aspects of addiction and rehabilitation, and it may now be the case that they all have to consolidate and share resources, and this can be done without compromising each organization's focus or integrity. I believe that in 2016 we will see donors looking for that kind of different thinking from charities and not-for-profits and territorial or turf wars within a specific sector may spell doom for some organizations.

Finally, Boards will have to be more active, work harder and think differently. Governance will still be a key role of course, but without actually stepping into the operational or Executive Director’s areas, Boards will need to make connections, seek innovative revenue sources and even social enterprise or for-profit opportunities. I believe Boards in 2016 will no longer have space for place holders or other non-contributors as they struggle to find strategies and plans that require different thinking than was necessary when money was easier to get with $110 oil.

Blane Hogue (click to see Blane's profile)

Principal

2016 OUTLOOK - HOSPITALITY & TOURISM

There are occasions, when a New Year is upon us, we can look back and say "good riddance" while we look forward to a better and more promising future year. Unfortunately, we welcome 2016 with apprehension and trepidation and not our usual excitement and optimism. Economically, we expect 2016 will be as challenging as 2015, if not more. 

You may ask what the problems are with the tourism and hospitality industry. After all, as an export industry the price of tourism products for foreign visitors, especially Americans, is very attractive these days because of the weak Canadian dollar. And on the flip side, Canadians are hesitant to use their undervalued Canadian dollars to travel in other countries because they will be paying 30-40% more for foreign destinations. This should be good news for the Alberta tourism industry having all these Canadians vacationing more frequently in Canada. Also, with fuel prices so low, transportation companies in the tourism industry, like airlines, motor coach operators and many others, are seeing dramatic expense savings on fuel.  These three benefits of the current economic conditions will have some positive influence on hospitality and tourism. Unfortunately, not nearly enough!

Business travel associated with the Oil and Gas industry is Alberta's and Calgary's bread and butter, but this has virtually dried up. Christmas parties and other events, travel budgets and expense accounts have all been shaved back in an environment of expenditure freezes and layoffs. Business travel and expense accounts are a higher dollar yield per visitor or patron than leisure travelers and so when business travel is bad everyone feels the hurt. When layoffs occur and unemployment rises there are less people with disposable income which is critical to the health of the travel and tourism economy. And finally, when consumer confidence is low because of losses in the investment markets, ongoing announcements of more layoffs, uncertainty in the political arena, and the war on terrorism, the travel and tourism industry is negatively impacted. Travelers need to feel safe, secure and able to spend before vacations and family getaways are taken with the same fervour Canadians usually embrace travel. 

And so, I am afraid we will continue to hang on tight for another challenging year in tourism and hospitality.  We hope that in December 2016 we can say good riddance to the past two years, confident 2017 will be a brighter one!!

Randy Williams (click to see Randy's profile)

Head of Practice - Hospitality, Tourism, Destination Management

2016 OUTLOOK - OIL & GAS

We continue to consume over 90 million barrels of oil a day and the outlook for 2016 is that we will consume even more. That said, the world's oil industry continues to produce more. Major world events that, 20 years ago would have caused huge spikes in the price of oil, barely register. While North American production will continue to drop over the next twelve months, due to strong downward pricing pressure, other lower cost producers will continue to fill the void, resulting in little change to the price of oil. There will be some significant consolidation in small oil producers and service companies here in Alberta, in the hope that being larger will allow them to wait out the price collapse.


Simon Batcup (click to see Simon's profile)
Principal

2016 OUTLOOK - INFORMATION TECHNOLOGY

Companies will continue to move their data to the Cloud and their software requirements to S.A.A.S. (software as a service). While there are still concerns regarding internet security, the ease with which companies can operate on 3^rd party servers and software will mean that this side of the business will continue to grow in 2016. The number of Cloud providers will shrink as players in this market gobble up their competition. There will continue to be I.T. consolidation across north America and around the world.

Simon Batcup (click to see Simon's profile)

Principal