Case study: Small, rapidly growing company reduces risk through “edge of cliff” scenario analysis and process improvements

Problem: Terrific sales lead to more business than they could support

Terrific sales were the good news. Growth that was happening too fast was the bad news for a small investment firm. The CEO was not certain the company could support the rapidly increasing volume of business with existing processes, people and technology. He worried that they might miss critical signs of major risks. This very successful firm on the West Coast regularly competed for clients against a much larger, much older and much better known financial services firm based on the East Coast. It was a classic “David vs. Goliath” business scenario. My client, whose reputation for excellent investment results was beginning to become much better known and started to win all new accounts when it competed against its East Coast rival.

In addition to the CEO’s fears about missing important cues of trouble in the midst of rapid growth, teams of people in investment, account management, customer support and administration who had to deliver the excellent service that sales promised were not sure they could continue to do so with rapid growth. They did not trust that the processes, technology and skills that had worked well in the past were up to the challenges of the higher volume that they were now facing. In fact, they thought they were almost guaranteed to fail – or could only succeed in meeting customers’ deservedly very high expectations if they invested many, many hours beyond a normal work week, all at potentially very high personal cost.

Solution: Define analytical framework, identify and prioritize highest business risks, and recommend improvements

Design and manage a project to analyze possible “edge of cliff” business risk scenarios. Use the results to create a decision-making and improvement prioritization framework. The decision framework was designed to provide users both general guidance and specific directions about which processes to improve, and how to do so, should any of the highest risk scenarios occur. The framework also provided guidance about measures they could monitor to notice significant changes well before problems happened. In other words, we taught them how to become proactive, to foresee potential challenges and prevent them – and know how to mitigate the risks, if problems did occur.

To complete the analysis and create the decision framework, I worked with managers and employees to define scenarios of possible “edge of cliff” conditions. We defined conditions that could threaten customers’ investment returns, among other issues, thereby potentially harming the company’s very existence. We assessed the risks that the company could face. I evaluated the risks and assessed the likelihood that they might occur, based on information from the company, as well as external information about issues that could affect company and customer fortunes.

Using the same process, the COO also completed an analysis. We compared our assessments, reconciled the few differences we had, and collaborated on recommendations. The result was a prioritization of all processes, factoring the likelihood of hazardous scenarios. We highlighted improvements that they could start to make right away.

Once we presented our findings to the rest of the company, everyone discussed the results and implications for future projects. Managers and employees began working on specific process improvements, as recommended. The changes improved the ease and effectiveness of their current operations, while reducing risks of any future complications.

Results: Clear framework for defining business risk and prioritizing improvements eases pain and decreases risk of bad markets

The “edge of cliff” analysis and business process improvement prioritization gave the CEO the confidence he needed that the company risks were under control. It also provided an improvement framework on which the four members of the leadership team could agree. For employees, it provided a clear structure for understanding their business risks, with a path they could take to reduce them.

Once the analytical framework was created, the improvement prioritization results were frequently used over the next few years. The CEO referred employees to the “edge of cliff” analysis and prioritization guidelines often as a way to focus action and problem-solving. It was equally useful to resolve internal conflicts about use of resources as the company continued its rapid growth.

This project used the following services: