Welcome to the May 2015 edition of The Director’s Dilemma. To read this email in your browser, go to www.mclellan.com.au/newsletter.html and click on ‘read the latest issue’.
This month our case study considers the course of action required for a company that needs to decide whether or not they will make a major strategic change and venture into an area where they have no prior experience.
Diana is managing director of a third generation engineering business. Her father, the chairman, has put together a board with his trusted advisers and two professional company directors to help to guide her.
Over recent years Diana has found her business losing contracts to overseas competitors who have lower costs for similar quality products. She has started to investigate establishing an international manufacturing facility and has found out about grants and other assistance available from the State and Federal governments. As her investigations have progressed she has kept the board informed and their questions have helped her to think clearly about what she wants to achieve.
Now she is convinced that she has found the right opportunity with a trustworthy joint-venture partner in a Chinese location where there is good transport infrastructure and reliable electricity, gas and skilled labour supplies.
The board have asked her to prepare a risk management plan to help them understand the risks involved in the venture and the way in which they will be managed. Diana is a little unsure how to start writing such a document. The company already has a risk management plan but that is very long and complex and she believes the board is expecting something short and action oriented.
She has talked about this with her father and he has counselled her to make a list of everything that can go wrong and then find ways of preventing or mitigating the adverse outcomes whilst safeguarding the venture. The trouble is that she can think of so many things that could go wrong and is certain there are more that she can’t yet begin to imagine.
How can she develop a document that meets the board’s needs and gives guidance to staff as they venture into a new area of activity?