9 MIN READ
HUB CP is all about taking a look at subjects close to entrepreneurs’ hearts in unexpected ways. Over recent months, we’ve been turning our attention to risk. We’ve been holding conversations with experts in the subject – a big wave surfer and a group of entrepreneurs and business leaders – gaining insight to their worlds. Adding into the mix the understanding we’ve gained from our clients and contacts.
You might think there wouldn’t be much in common between these two groups of people. We beg to differ. Both have a relationship with risk that changes over time. One can be a matter of life and death. The other impacts upon the careers and futures of employees. You can read more about big wave surfer Andrew Cotton’s views on risk and how they apply in a business context here. There’s also some pretty awesome footage to watch too.
RISKS IN BUSINESS
The subject of risk frequently comes up in business. How much of a risk would it be to do something? Or not? What’s the risk in developing a new product line? Entering new markets? Investing in technology? In property? Employing more people?
We’ve tried to get under the skin of entrepreneurs to understand how their appetite for risk impacts growth and performance.
An added dimension being the current challenge for business leaders of running companies during a downturn in the economy.
Take Kiran Parmar, owner of Winstanley House. His appetite for risk wasn’t diminished by the slowdown in markets and the current recession.
MAKE OR BREAK?
Braunstone Hall, as it was known before it became the iconic Winstanley House (hotel and restaurant) was in a shocking state – vandalised, burnt out, crumbling and looking like a disaster zone.
When people were asking him ‘why would anyone go there’ and telling him ‘mate that’ll never work’, Kiran refused to accept the disbelief demon. Like so many entrepreneurs, Kiran embraced the risk and turned his ambitious dream into a stunning reality.
For him adding Winstanley House to his portfolio of high-end hospitality venues was a calculated risk. Based on his experience and knowledge of customer appetite, location and the competition.
Kiran chose to embrace the risk and invest during Covid. Repeated lockdowns could have scuppered his plans. They didn’t. He became even more determined to meet the challenge they posed to the renovations head on. The result a thriving and successful business.
CHEWING OVER THE SUBJECT OF RISK
Kiran jointly hosted a recent HUB CP round-table event with Ben Eason our Head of New Business Relationships for a group of entrepreneurs. Drawn from a wide range of sectors, from supply chain goods distribution, automotive related to tech and all the way through to further education. All experienced business leaders who have taken significant risks and have plenty to share. It’s fair to say that the conversation was lively over an excellent meal at Winstanley House.
There were a number of themes that kept recurring as they discussed risk:
IS RISK ALWAYS INSTINCTIVE OR CALCULATED?
Let’s go back to our surfer dude for a moment. During our conversation Andrew talked about how younger surfing talent wants to jump right in and take on the big wave. But big waves can mean big fails. The same can be true of risk taking in business. All the entrepreneurs and business leaders around the table took calculated risks in their businesses. Mainly based on experience and knowledge of their markets. They all leverage their experience. It’s that experience that makes them effective risk takers.
LOOK NO SAFETY NET! – THE IMPORTANCE OF CHALLENGE
When it comes to big wave surfing it’s the guy on the ski jet that is critical. There to pull the surfer out the water after a wipe out. it can be a matter of life and death.
In business there might not be such an obvious ‘wingman’. Very often the role of challenging risk comes down to the CFO or FD to provide a counterbalance to the CEO who wants to take a risk. There was a strong view from our group of entrepreneurs that there’s an important role for the board when it comes to risk. Boards need to be careful not to collude. Not to get swept along with the desire of the CEO to press on. There needs to be healthy challenge and testing of ideas.
Grudgingly our business leaders accepted that like the big wave surfer they too enjoy the thrill of taking risks. They thrive on risk. Why else would they get out of bed of a morning?
DOES GROWTH CURTAIL RISK TAKING?
Around our lively table there was much discussion about whether the relative maturity of a company makes a difference to risk taking. There was a consensus that as business leaders its much easier to be closer to the action. To the coalface of the business as you’re establishing your business. It means businesses can be fleet of foot seizing opportunities. Shooting from the hip.
As businesses grow more management processes tend to be introduced. Due diligence becomes a consideration. There’s a need to take people with you. Not everyone is comfortable with risk. Particularly if they are depending on their income to pay their mortgage.
Whether you’re a big wave surfer or a business leader the risks associated with a particular course of action rest on your shoulders. There’s no one size fits all. Not everyone is comfortable with risk. Probably a good thing to provide balance. A business yin and yang. The underlying message – have a good mix of people around you.
THE ELEPHANT IN THE ROOM – IT’S THE ECONOMY STUPID
So what did our group of entrepreneurs and business leaders think about the impact of Covid on the economy and their willingness to take risks? Does it present opportunities or does it put the brakes on? A show of hands definitely indicated all present were looking at opportunities. Including Kiran who is already eyeing up another potential high-end hospitality venture.
Stories were shared about using Covid as an opportunity for change. In one instance a tech company moved its operation into the insurance brokerage space. Using their confidence in their product to move it into a new market. In another the increase in shipping costs meant a rethink about which markets to penetrate.
Not all risk taking works. You don’t always hear about the failures. It’s only the success stories that make the news. But the options are simple. Avoid risk. Stand still and potentially watch your business slowly fail. Or it’s about diversification. Either into new products or new markets. The collective wisdom round our table were of the view that the calculated risk is to do either. It’d be foolish to attempt both at the same time.
IT’S ALL ‘BOUT THE MONEY
There’s a very obvious paradox when it comes to successful businesses who attract investment. Risk pushes growth forward. The very thing which attracts investors – their success, often based on creativity and risk taking, is curtailed. Post investment business leaders become focussed on managing out risk.
In the experience of our entrepreneurs post private equity investment their relationship to risk changed. It became about managing risk rather than risk taking. Processes were put in place to reassure investors around the board table that their investment is safe. Private equity investment is heavily geared to provide financial returns.
Cards on the table. This is an exciting time for us at Cooper Parry. We’re in the process of finalising a private equity deal which will see considerable investment to support our ambitious growth plans. We’re determined to retain our culture and values which drives our success. We know this is possible as our culture and values made us attractive to the investors. Watch this space.
JOIN THE CONVERSATION
Our HUBCP leadership series is all about exploring how Founders, Owners and Entrepreneurs can share, learn and then impact their business with fresh, ballsy and vibrant thinking.
We get straight to the heart of any prickly matter by provoking open and honest discussion in an intimate, peer-to-peer setting. The series is punctuated by dazzling insights from our quarterly round-table events, hosted by Ben Eason, Director of Cooper Parry Business Relationships.
We spotlight outstanding leaders in their field to share their stories of trial and triumph and spark deep discussion into real life issues. Key learnings are continually shared to take away, apply and learn from.
Above all, we keep it real. You get the drift.
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