What does the Carillion crisis tell us about Risk Management?

I did not mention Carillion in post about New Year Risks

I did not foresee the Carillion crisis in particular, but I did mention the supply chain risk. How right I was.  We are all increasingly dependent on each other as the economy becomes more interconnected, which leads to one of my concerns about Brexit.

Dice. Is that how you manage your business? Was it how Carillion was managed?
Dice. Is that how you manage your business? Was it how Carillion was managed?
Was the Carillion crisis unforeseeable?

If you think this is all about hindsight, you are wrong. I now know that it was foreseen by many commentators, although I wasn’t one. Of course, I’m not in the government, but they were warned and should have taken steps to mitigate the risk, and perhaps some of those affected could have done more to protect themselves, as the banks have, I believe.

Did you know that the French pronounce the name of this company like “Carry-on”? What can I say?

Whether you have dealings with Carillion or not, learn from this
  • Check not only your suppliers, but their suppliers, and ask yourself how safe they are.
  • Try to avoid becoming too dependent on any one supplier.
  • Look at your clients and don’t become too dependent on any one of those.
Does this advice apply when you are dealing with a company as big as Carillion?

Of course, I recognise that my advice above may be unrealistic in some circumstances, but you always need a Plan B that does not depend on your biggest supplier or client, as far as possible.

I also know that many people thought Carry-on was too big to fail, because the government wouldn’t let it. Time will tell, but I remember Lehman Brothers.

Is the Carillion crisis an opportunity for some?

Remember that the other side of risk is opportunity. If you are a competitor of this company for any of the services they provide, perhaps you will get an opportunity to tender, or re-tender, for one of their contracts. It’s an ill wind that blows no man any good. Are you ready?

Stacks of money. Could you benefit from the Carillion crisis?
Stacks of money. Could you benefit from the Carillion crisis?