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"What happens to my customers if energy becomes more expensive?" How do high material costs affect my prices or my procurement market? These and other pressing questions are currently being asked by many medium-sized businesses. Questions raised by economic crises and changes in many influencing factors. Questions that should be answered early on. Only then does a company have the best possible chance of averting potential risks and crises. This requires transparency in relevant business areas, which can be created through an early warning system.
Market, customer, competition: Keeping an eye on developments
The early warning system is established as part of a forward-looking risk management approach within the company to permanently monitor success-critical areas and thus be able to identify developments in good time. According to Section 1 of the StaRUG (German Corporate Stabilization and Restructuring Act), early risk detection is mandatory for those managing a company's business. It provides entrepreneurs with the necessary lead time and room for maneuver required to successfully avert an impending existential crisis. To this end, essential parameters and their development are brought into focus. But which ones are these? A medium-sized company is a complex, dynamic construct. There is a multitude of potential risks within the company and its environment. However, for an early warning system to be implemented in a medium-sized business, it is important to focus on those that are critical to the company's continued existence. Naturally, there are areas that are easily measurable, while others must be assessed according to qualitative criteria.
Relevant early warning indicators
Revenue is typically one of the observation fields of an early warning system. This includes a multitude of issues. The economic situation of my customers addresses potential sales volumes and the security of receiving the agreed consideration for services rendered. Also included here are considerations regarding a competitive product and service policy in light of technological developments or other changes in the company's relevant markets. These aspects and factors must be defined and evaluated by the early warning system in sensible, individual cycles.
Ensuring success in practice
For our medium-sized clients, we identify which observation fields should be integrated into the early warning system. What are the sensitive areas in the company? What are the risks that threaten its existence? What is happening along the value chain? With a clear view of the interrelationships within the ecosystem, THE MAK`ED TEAM specifically defines where the company needs to place its "antennae." The early warning system then sounds the alarm in success-critical areas when factors develop critically. The company should then react immediately. How exactly it should react in each case is worked out as part of the risk management process. A strategy provides clear recommendations for action.
Conversely, the early warning system can also be used as an opportunity system: positive developments in the identified observation fields are also regularly reviewed and evaluated. For example, well-performing products or services can be identified and promoted early on, or new trends can be recognized and assessed for strategic alignment. Permanent mentoring and reporting of relevant business areas is also playing an increasingly important role in medium-sized business financing.
Conclusion: The early warning system creates transparency in the ecosystem that the company can use in a variety of ways. Through a systematic approach and fixed automatisms, the entrepreneur always has an overview of how the essential parameters are developing. Through routine mentoring of early warning indicators, the medium-sized business can react to changes in good time.
The requirements for an early warning system should not be underestimated – but they can be implemented in a focused manner with the necessary experience and the right tools. THE MAK`ED TEAM develops structures that are established as essential components of the early warning system within the company and are scheduled according to the indicators.
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