The art of finding solutions to the unknown-unknown.
~Raghuram G. Rajan
The recent webinar held by Headstart turned out to be no less than a hack for startups to deal with risks in these tough times where all of us are stuck at home with nothing to do but save our businesses from facing losses. It was not only an eye-opener for small startups but for anyone who owns, runs, or manages a business. It is a mere fact that all of us in the market industry are facing numerous risks but are choosing to not do much about them. Instead of leaving the risks for later and letting them linger on, the speakers made us realize the importance of not only finding solutions but also implementing them.
This time, we had with us The Head of Strategy and The Chief Risk Officer of Infosys, Mr. Deepak Padaki. As the Chief Officer, he is responsible for defining the company’s risk management framework, identifying and monitoring the risks to the successful execution of the company’s strategies and operations. He not only gave us wisdom but his little pieces of advice were no less than golden words that if implemented, can help the startups reach heights.
First and foremost, Mr. Deepak gave an insight into how his company and he had planned to be prepared for something so unprecedented. According to him, it is important to choose our battles wisely, keeping factors like resources, budgets, authorities, and networks as the primary focus. Apart from this, the preparation should be four-fold –
- Indicators of Health – Number of deaths, total cases, vaccinations, symptoms, etc.
- Government Response- Loans/Stimulus, market potential, and their determination.
- Overall Sentiments – Not just of the customers but also the employees and the workers.
- Economy Development – Monitoring whether it is deteriorating or coming back.
Moving on, a discussion on key learnings from the previous few crises took place. Even though this situation is different than the various ups and downs that the market has faced in the last 30 years, it is always important to dwell back on the crisis of the past and implement the learnings from back then.
Focus on Clients and keep Relationships Alive. Make sure that you keep a check on what is happening with them and you are in sync. Ask them where it is hurting and then show them that you are there to help. It is important to not just think short term during these tough times.
Do Not Freeze Up. Do not wait for things to get better and then decide to take action – it will be too late. In the words of a famous businessman, if you are stationary it is hard to move but if you are moving, it is easier to take a turn.
Investors are experiencing difficult times as well and it is only natural that they will go slow too. Since the Investors network works on faith, trust, and dedication, it becomes equally important to keep relationships alive with them as well.
Mr. Deepak Padaki also talked about his perception of the change in strategies of startups and the sense that he gets as an Active Investor. Naturally, the working capital is slowly drying out and hence every business is getting cautious about spending money. The Venture Capitalists are becoming defensive as well as slow, giving in cash where they have already invested, hoping to prosper. The valuations have come down and the certain exits that they might have planned are now not happening. The Seed Companies, on the other hand, seem to be safer since they are not dependent on the market.
His mindset is simple – Pivot but Good. Jumping into conclusions just to capture some revenue is certainly not the right way to go about it. If you are pivoting make sure that your ideas will sustain. There is a need to architect the ideas in such a way that you have the liberty to discard the top layer but make use of the bottom one.
Large enterprises without a doubt have always been one of the major threats for all the startups. It is even more that these days the companies are trying to lead their way with new innovations. If the large companies were earlier not interested in the niche the startups have, now they have an increasing interest since the markets are drying up and they too need to find ways to keep their customers satisfied. All of this may lead to increased competition and so the startups need to be more cautious. It is now important to transit into survival mode since necessity is the mother of invention.
Implementing Risk Management Framework always needs to be at the right time; in the right way. While the right timing has always been debatable, it is a good time to set governance in place when the stakes become high. Setting good corporate mechanisms, getting processes in place, focussing on the product, contracts/legal, and strong measures to contain liability are few of the key pointers to keep in mind. The biggest risk is the loss of the founder and hence, there is a need to build a mechanism where you can function without one. According to Mr. Deepak, even though it may sound trivial at the moment – it is always a good idea to maintain proper board minutes.
The Thesis for Infosys has expanded over time and now has come to be known as the “Innovation Network.” The primary focus has always been client relevance and so when it comes to collaborating with startups, there is a need for them to have a creative edge that will bring value to the clients. Another major factor is looking at the market value and then giving out finances or assistance at the engineering scale.
According to LiveMint, 25% of startups are bound to fail if the situation of COVID-19 persists for long. This fact makes it even more important for all the entrepreneurs to learn about risk management from some of the bests in the industry.
The importance of Resilience has increased over time and is extremely important for startups to focus on. It is no secret that everything is restricted these days and so this is the correct time to read up, rethink your ideas, and plan for the early years. The market is volatile, businesses are under stress and so now is the time to focus on optimizing existing resources. Do not take anything that you are going to throw away 1 year down the line.
While struggling in business is inevitable, it is essential that we face the risks head-on and be ready with a detailed plan of action; especially in times like these.
Volunteer- Headstart Gurgaon