“What happens to my customers when energy becomes more expensive?”. How will the high material costs affect my prices or my procurement market? These and other pressing questions are currently being asked by many SMEs. Questions raised by economic crises and changes in many influencing factors. Questions that should be answered at an early stage. Only then does the company have the best possible chance of averting potential risks and crises. This requires transparency in the relevant areas of the company, which can be created by an early warning system.
Market, Customer, Competition: Keeping an Eye on Developments
The early warning system is established within the framework of forward-looking risk management in the company in order to permanently observe areas critical to success and thus to be able to recognise developments in good time. According to § 1 StaRUG, early risk detection is obligatory for persons who manage a company’s business. It provides entrepreneurs with the necessary advance notice and room for manoeuvre that they need to successfully avert an emerging crisis that threatens their existence. For this purpose, essential parameters and their development are taken into account. But what are they? A medium-sized enterprise is a complex, dynamic construct. There are potentially a multitude of risks in the company and its environment. But in order to implement an early warning system in the SME sector, it is important to focus on those that are critical to the success of the company as a going concern. Naturally, there are areas that are easy to measure, while other areas must be assessed according to qualitative criteria.
Relevant Early Warning Indicators
Turnover is typically one of the fields of observation of the early warning system. A large number of questions can be categorised under this heading. The economic situation of my customers addresses potential sales volumes and the certainty of receiving the agreed consideration for the services. Likewise, the considerations of a competitive product and service policy under the aspect of technological developments or other developments in the company’s relevant markets are also included here. These aspects and factors must be defined and evaluated by the early warning system in meaningful individual cycles.
Securing Success in Practice
For our medium-sized clients, we identify which areas of observation should be integrated into the early warning system. What are the sensitive areas in the company? What are the risks that threaten the existence of the company? What is happening along the value chain? With a clear view of the interrelationships in the ecosystem, THE MAK`ED TEAM specifically defines where the company needs to put its “antennae”. The early warning system then sounds the alarm in the success-critical areas when factors develop critically. The company should then react immediately. How exactly it should react in which case is worked out within the framework of risk management. A strategy provides clear recommendations for action.
The early warning system can also be used as an opportunity system: Because positive developments are also regularly viewed and evaluated in the identified observation fields. For example, products or services that are running well can be identified and promoted at an early stage, or new trends can be recognised and evaluated for strategic orientation. The permanent mentoring and reporting of relevant company fields is also playing an increasingly important role in SME financing.
Conclusion: The early warning system creates transparency in the ecosystem, which the company can use in many ways. Through a systematic approach and fixed automatisms, the entrepreneur always has an eye on how the essential parameters are developing. By routinely mentoring the early warning indicators, the SME can react to changes in good time.
The requirements for an early warning system are not to be underestimated – but can be implemented in a focussed manner with the necessary experience and the appropriate instruments. THE MAK`ED TEAM develops structures that are established as essential components of the early warning system in the company and are arranged in time according to the indicators.
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