Is Your Business or Organization In Need of Viability and Stress Testing? Ask Yourself the Following Questions…

Stress Testing is a term that was made popular by the Financial Industry and Regulators after the 2007- 2008 global financial crisis. As a result, or because of the post-2008 anxieties in the financial industry, many businesses now believe, erroneously though, that Stress Test is for the financial industry alone. The data, however, shows that the most successful organizations and businesses have, for decades and long before the 2007-08 financial crises, made viability and stress testing part of their periodic business and organizational health checks.

As humans and individuals with healthy lifestyle who are age 45 years and above, and who pay close attention to their health, will be quick to remind you that, a periodic visit to the doctor for checkups is not for the sick alone, but for those who want to remain healthy and who want their health and lifestyle to be predictable. This is also expected of businesses and organizations that want to remain viable, strong and successful, and want this success to be deliberate and predictable. In the life of a business or organization existential threat could arise from a number of channels including, the market, external business cycle, other macroeconomic factors, personnel, finances and cash-flow, technology, profitability, other growth variables, clients, vendors, social stakeholders, other stakeholders, environment etc.

So, is your business or organization in need of a viability and stress test? Ask yourself the following checklist questions:

S/N Question Responses
Yes No Maybe Maybe Not
1) Has your business or organization reached a mature stable growth point or stopped growing, as you would like?
2) Did you miss critical objectives and targets for the last measurement period, and for at least 2 consecutive measurement periods before the last, even after investing so much effort and resources achieving these objectives and targets?
3) Would your business experience an existential threat if 30% of your clients or customers default on payment or abandon you?
4) Would your business or organization fail to deliver on commitments if 3 (or 5% for large organizations) of your employees quit on you?
5) Would your business or organization fail to meet your commitment to critical clients and stakeholders if 2 of your vendors or clients (customers) fail to deliver on commitment, and this would pose an existential threat to your organizations?
6) Would your business face an existential threat if one of your financial partners (banks) cuts off a credit line to your business?
7) Is your business cycle fully locked to an external business cycle?
8) Is your business exposed to an unstable or unpredictable social environment (e.g. resource producing companies who operations are in host communities)?
9) Is your business or organization politically exposed?
10) Would your business products or services standup to a robust and aggressive competition by an entrant?
11) Does your business have a tested succession plan for critical leadership that is supported by stakeholders?
12) Does your organization or business have a robust information security and business continuity system for your business or organization?

In your answer to any of questions 1-9 is YES or Maybe and questions 10-12 is No or Maybe Not, then thinking about viability and stress testing for your business my be great for your business or organization.

Article contact: Joshua Gogo (PhD); Joshua.gogo@ldcsgroup.com

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