What could damage the numbers.
WHAT THE COMMON RISKS ARE
A large customer leaving or failing to pay A supplier failing Costs rising suddenly Exchange rate movement Demand falling Loss of a key person
WHAT CUSTOMER CONCENTRATION MEANS
Depending on a few customers for most revenue.
WHY IT IS DANGEROUS
Losing one changes everything, and it gives them pricing power.
WHAT TO MEASURE
The proportion of revenue from your largest customers.
WHAT TO DO IF IT IS HIGH
Deliberately develop others.
WHAT SUPPLIER CONCENTRATION MEANS
Depending on one source for something essential.
WHAT TO DO
Identify an alternative before you need one.
WHAT EXCHANGE RATE EXPOSURE MEANS
Costs or revenue in a currency other than your own.
WHY IT MATTERS HERE PARTICULARLY
Imported inputs and foreign-denominated services are common, and rates move substantially.
WHAT TO DO ABOUT IT
Price with an allowance Review prices when rates move materially Include a mechanism in long contracts
WHAT TO DO ABOUT COST INCREASES GENERALLY
Review pricing regularly rather than absorbing them.
WHY
Absorbed increases erode margin invisibly.
WHAT TO CALCULATE
What happens to profit if a major cost rises substantially.
WHAT TO PREPARE
A plan for each significant risk.
WHAT TO REVIEW ANNUALLY
The list, and whether anything has changed.
