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Hey, what’s going on? Welcome to the Doug Show. I’m Doug Cunnington, and today we’re gonna talk about risk management. I haven’t emphasized it a ton recently, but one of the key things with being successful online is to be able to keep going and with a smart risk management plan. You can avoid catastrophic mistakes, and that’s one of the big things, and I’ll give just a quick example.
Basically, let’s say you’re successful, you’re earning some money, and you don’t realize the cash flow implications. For example, maybe you’re earning money from affiliates or other vendors who pay you, but they don’t pay you right away. Maybe they wait 30 or 45 or even 60 days. So while you’ve earned a good chunk of money, you might have a little delay before you get that income in and could be fine, especially if you’re earning good money and you’re slowly ramping up.
But one thing that can get you is if you have that bit of a delay and then you don’t realize that. You have to pay taxes because now they’re not being withheld by your employer. Depending on where you work and live, this may or may not apply, but in the US, and this is exactly what happened with me, you know you don’t have taxes withheld on yourself, employed side hustle income that’s coming in.
So you have to pay that and you have to set aside a certain amount and depending on how much you’re earning, and many other factors consul your own professionals, of course you might have a fairly sizable. Tax bill, like tens of thousands of dollars, for example. And when once things are rolling, well, you realize, oh, maybe you have to pay taxes quarterly.
And in that case, maybe you’re paying thousands of dollars each quarter and you need to manage your cash flow in that way. So this is a, a risk. That’s a possibility that something could happen and turn into an issue, which is like a realized actual risk that has taken place. So you might have an issue come up, but if you paid attention and you thought about it ahead of time, Hey, what can go wrong?
Then you could plan ahead. That is really the sort of main idea and thesis. Figure out some stuff that might go wrong, what might get in your way, and then figure out what to do to avoid it or minimize the. Overall impact, and we’ll go through exactly what you can do. This is an unsexy topic. You know, I can’t call it risk management.
I’ll have to come up with something a little bit better or, uh, more likely than not, I’ll ask, uh, Gemini to help me out with some titles that are a little bit better. But that is the main idea. So what might go wrong? How can you potentially deal with it? And we’ll go through the exercise. I have a. Project management background.
So we went through this very explicitly, and one of my first roles in project management directly was, and, and maybe one of my, my bigger roles early on was a risk manager. So I had a meeting, a standing meeting I think maybe twice a week with my boss, the boss’s boss, uh, all the leadership basically. And it was just the, the leads.
And we talked about what might go wrong and what we could do about it. To make sure that nothing, um, really bad happened. So it was risk management and issue management. They kind of go hand in hand and essentially you make a list, you talk about it, you figure out who you need to go to, and then take it from there.
The other thing that you. Is prioritize so that you spend time on the things that have the greatest impact or maybe the things that are most likely to happen with a high level of impact. So if you’re working by yourself online, it could be a little bit overkill to have, you know. Everyone on your team, let’s say you have some contractors, so you’re working by yourself and maybe you have contractors, so it might be overkill to have like a big meeting and you’re doing all this stuff, but it’s definitely useful to have this exercise where you go through, list things out on a periodic basis and make sure you’re trying to stay ahead of it.
Another reason it’s good to go through this risk management exercise if you’re working by yourself, is you’re probably a little bit scattered. You’re. Managing things. Maybe you’re working with vendors or contractors that are working for you, and then you’re doing some of the work yourself. Maybe you’re doing this on the side so you have a full-time job and a family and many other things to manage.
It’s really easy. To forget the things that you know might actually be a risk. So to have the list that you revisit on a periodic basis is a good way to ensure that you don’t goof up and miss something, number one. But even worse, if you know something could be an issue, but you forget to follow up on it, then you feel a little silly because you knew you may run into issues there and it could have been very easily preventable.
Before I get into the tactical stuff, I will give another quick summary just to make sure people follow along, and you could take this little bit away. So you’re figuring out what might go wrong and you’re thinking about. The things that could happen if a specific risk actually becomes an issue. And one way you could think about this is if you had a mentor that was working with you, say every week, and they were asking you, Hey, what might go wrong this week and maybe for the quarter or however long, but what might go wrong?
And then what can you do about it to prevent it? And then you could imagine just having this conversation with a mentor, and I think I mentioned it the last couple weeks, but basically. This is a good thing to do with AI because it can have a conversation and maybe serve a little bit as a business mentor where it just asks you, Hey, what might go wrong if it does go wrong?
What happens? How likely is that to happen? And that encapsulates the main idea of what we’re doing here. So number one, if you are thinking, Hey, I want to give this a shot, and you could do. Little pieces of it. Whatever works for you. This is not a specific prescription where you have to do all these things, just do whatever works for you.
Maybe you could just take a little pieces here and there and integrate it into a system that you already have in place. Basically, you will have a list of your risks, so you have some information in there. You list the risks out. Ask yourself, how might this project go wrong? Maybe there’s delays with other people that you’re working with.
Maybe you get slowed down. Maybe someone gets a cold or something like that. But basically you are thinking, Hey, what might go wrong? A great way to break this down is to look at at least three different areas, and these are a great starting point. So number one, a technical issue. I’m assuming most people are doing some online thing and a technical issue could be your laptop dies.
So what happens? Do you have a lot of files and data that are on your laptop that will prevent you from moving forward? Can you just buy a new laptop or borrow one and then all your info’s on the cloud? Maybe that is the case. Could be as simple as your website going down, or maybe your cloud storage somehow gets corrupted or there’s some goof up with, um, an integration.
So I had this issue all the time when I had my own website and then I was using, uh, Zapier to integrate a bunch of different systems. When things were working fine, it was great, but I would say once a month, one of the integrations between, I don’t know. Maybe five or six systems that I was using, one of the integrations would goof up.
Maybe an API was updated, and now the parameters are changed. So now it breaks the whole thing, or you move on to a certain step and then the order stops. And then someone who enrolled in a course didn’t get access because it never completed the full process. So in that case, you know it’s a technical issue.
Maybe there’s an easy way to fix it, but technical issue, that’s one another is, uh, financial, as I mentioned before, this could be a cashflow thing. This could be taxes. It could be a client that is not paying their invoice, or maybe they are delayed and for some reason because they haven’t gotten paid yet.
Right? So there’s all these different kind of issues. Maybe PayPal. Is, um, shutting down your account, or there’s some issue with transactions. It could be like ad spend. Maybe you’re running ads for an e-commerce shop, and then all of a sudden for some reason there’s a new player and they’re buying a bunch of ads and they’re driving the cost up.
So all of a sudden you have an issue with your ads. They’re not profitable anymore. Another area is external. This is a big one. And it could be, I mean, a lot of these are unknown unknowns and you can’t really do much with those. However, external factors might be an algorithm change, so Google, Facebook, Instagram, TikTok, fill in the blank.
Pinterest algorithms change constantly, and it could be, you know, minor changes or it could be dramatic, huge things. Another could be. The, uh, advancement of AI in a specific area. Let’s say all of a sudden AI content is really well done. So there’s a flood of new content just like happened with the. Uh, niche site industry, all of a sudden there’s a ton of new websites.
Um, a a an established website might just publish a huge amount of content because all of a sudden they could just like publish more and more and more. So that thing could, um, really impact your industry overall, which literally happened Another. Real example is commission rates. So a small company could change the commission rate, or a big company like Amazon can lower their commission rate, and all of a sudden you were.
Um, you know, effectively, like a 8% commission rate can get cut down to 5% or 3% or whatever, which is a huge hit in that. Again, literally that happens. So those are external, those could be changes in laws, those could be big changes in the industry. It could be, um, a sponsor leaves your show, for example.
Again, these are all just real things that happened and you have to figure out how to. You know, keep pushing on and what to do if those things happen. So. What you can do is have those different categories, and it’s a good way to just like narrow your thinking as you’re trying to come up with risks that may pop up.
Again, AI could be a good conversation partner to ask you questions. Hey, is there a risk here? Is there a risk there? And maybe it can point out things that you completely overlooked. How often should you do this? Totally up to you. I would say at the beginning of a project, or if you’re just starting, maybe you want to do this once a week or so to get things, uh, locked down.
But once you get rolling or if you, you have been running your, your business for a little while, you don’t need to spend as much time, but. Depending on whatever the issue or risk might be, you may need to come back and revisit it. So you actually could have a column in your, um, like in your risk list that has, uh, how often should we go and look at this?
And you could assign a specific date, like, Hey, revisit this on a specific date. And maybe it’s quarterly, maybe it’s every two weeks, or whatever makes sense for that specific thing.
In your list, you should also have. Some information about the impact and the probability. So you could sort of think of this as like four different categories. So low probability and high probability, those two. And then the impact could be low impact or high impact, or somewhere in between. You could rate rank it like one to five or one to 10 or whatever you deem, uh, the sort of classification.
It could be high, it could be low. I would say high and low at a minimum. one thing that should be obvious is you don’t want to burn a bunch of time and effort and energy on something that doesn’t really matter. So if it’s a low impact thing, you maybe don’t need to worry about it too much, and as your career kind of progresses. As time goes on, you’ll get more information and knowledge and experience about a big impact versus a small impact. Quick example. You know, if you’re just starting out and you’re thinking, oh, it’ll be a really horrible thing, if I send out an email and the link is incorrect, I’ll, I’ll be embarrassed.
People will click on the link, they’ll lose trust, and it’s not a great thing, but it’s a, it’s a little mistake, right? It’s not a huge deal. It people understand mistakes and while it might feel really bad in the moment, not a huge impact, it doesn’t mean you shouldn’t double check your links and make sure you’re.
Sending out the right link to, uh, your email list, but at the same time, it’s not the, it’s not the worst thing in the world. A little embarrassing but not horrible low impact overall. So as time goes on, you’ll be better at assessing the actual impact versus like the psychological hit that you might take by making a silly mistake that you could have fixed before.
I sent an email yesterday and it wasn’t horrible. It was like I sent. A link to a not ideal page, and it was my fault, uh, number one, but the affiliate deal that I was sending out in the dashboard, the, the list of links that I could. Send people to. I just, I picked the, the top one that looked like it was right, and I was like, well, this seems okay.
Later I found out there was actually like a full sales page, so if you’re on the email list, you probably saw this. You were like, this is not a great sales page. So I. I realized it later, not a huge deal. Little, uh, embarrassed and I’ll probably tell the people that have the course, you should probably list your sales page so that other folks don’t make a mistake and send out a link that is in that ideal sales page, right?
It was just like a, a list of items and it wasn’t a good sales page. So anyway, impact and probability, and what you could do is have a column for the impact and the probability for each one of your risks, and then rank it however you deem necessary. Again, high or low is perfectly fine. The ones you really wanna focus and spend time on, I think obviously high probability with high impact, those are.
Likely to happen, and apparently there’s a high impact, so you need to take care of it. So that’s something you should focus on, spend all your time on. Of course, on the other side, not, uh, probable and not a high impact, you can kind of ignore those. So it’s good to be aware and you might, if you want to, you could have another column, right?
Or a little comment section where you say, keep monitoring this. The impact is low Now. But maybe this is something that can grow into a, a bigger issue with high impact. So you can think about that, and this is one of those situations where you ask like, what if this happens? What if this happens? What if this happens over and over again on a specific issue?
And then see if it actually leads to a, a very high impact issue that you need to take care of. So with that focus on high impact areas. Some of them might be low probability, but high impact, and those would be, you know, the rare black swan type events that you really can’t control. So think of this like the commission rate changes.
So these are external, I can’t really do much about it other than maybe have. Of high amount of cash reserves or make sure that there’s a way to earn money, um, external from whatever that issue is. Now that said, we are gonna get into the four different strategies for your risk response, but before that, we do have a sponsor over at SEMrush today.
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So at the beginning of the year here, I’ve been testing out some different ideas for shows, some that’re a little more, uh, kind of practical leaning on my project management, um, background. And I’ve gotten a good response. People are appreciating the. I guess practicality and usability of some of the ideas, and it is forcing me to prepare a little bit more ahead of time.
There’s fewer stories. I’m trying to keep the shows a little bit tighter. That said, one of the fun parts of doing a show is having the uh, ability to go on the tangents and talk about random stuff that is unrelated. To business, which I did a lot of that last year. So I wanna make sure that I don’t swing too far in the other direction.
And I realized this after I was like writing down the list of the shows that I was gonna do and I was like, oh, these are all a little too, um, like enumerated. In fact, they were literally like five things you could do. Seven things, 17 things I should. Put some number on this specific episode. But anyway, I think maybe like one out of, uh, uh, four, maybe 25% of the episode should just be like the random, you know, maybe a more of a grab bag of topics slash maybe if I get some questions in that sort of thing.
So if you were missing that. They’ll come around again. I just need to, uh, figure out the right cadence and then probably what’ll happen, it’ll be a seamless blend of, uh, a topical thing and then I’ll sneak in some stories that are unrelated for now, we’ll get back to the topic and that is what you could do if you actually have, um.
We’ll get back to the topic and we’ll talk about the specific things that you could do in response to a risk. So these are, uh, you know, deep into the PMP mindset and the the PMBOK and all that stuff. So, number one, you can mitigate. The risk, and that is essentially reducing the odds. And I’ll give an example of each one of these once we go through ’em.
So mitigate and that is reducing the odds, lowering the probability transference. So this is essentially delegating and passing the responsibility to another party. Number three is avoidance. That is changing the plan. So, uh, that is very much lowering the probability from this thing happening. And then number four is acceptance.
And that is basically this could happen and we will deal with it and we accept the, the consequence. So back to mitigation again, reducing probability. And let, let’s look at, uh. A technical issue that may pop up, let’s say a data failure, like a hard drive failure. So you could back up your files on a periodic basis, say once a week to make sure that if you do have a data loss, then it’s limited to just a, uh, a smaller portion of all your data and maybe, you know, if you do backups on a daily basis.
Right? So that. Could be totally doable. You’re really reducing the odds of any kind of data loss there. Number two is transference. So this is moving the responsibility to another party and delegating for, maybe it’s a financial risk here. This is an online transaction. Maybe I’m selling a domain name and instead of paying the person, um.
Directly instead of them paying me directly, um, or vice versa. You could imagine what I’m. Talking about here. So there’s a payment happening or, alright, so you could use escrow essentially, where I would put money into escrow and then the uh, person would give me the, uh, domain. Maybe I’m buying the domain in this case, and then I don’t wanna just pay them directly ’cause maybe they don’t transfer the domain.
So reducing the risk I can’t and pass this along to the escrow company. Then we’re both protected both. Buyer and seller are protected through the escrow because the money has to be deposited to an external source and then be released once the goods and services are extracted or transferred. So you get the idea, basically you delegate to another party, uh, from a technical standpoint.
Maybe security could be an issue. So maybe you have a security contractor that you’re hiring to make sure security is up to snuff and all your plugins and other uh, integrations are all secure, and then you don’t have to worry as much about the security issues.
Okay. Number three, the avoidance one. So this is changing the plan, so you move the probability, uh, extremely low or potentially to zero. So let’s say you have a potential client, you’ve interviewed them and they’ve interviewed you, and you could tell this has happened to me. You could tell right away that they’re a little high maintenance or they’re asking for something that.
You know, doesn’t really fit with what you want to deliver, and it’s just not a good fit. And you wanna avoid the issue of having a client that is unhappy, a high amount of customer service, and just holding their hand. Maybe that’s not your style, so you can. Decline that client and not say, I, I’m just, I, I’m not gonna work with you.
You can make up whatever excuse you need to the bandwidth, the scope of the work. You wanna do whatever it takes, but you could decline and avoid that risk altogether. Number four is acceptance. So. We’ll use the same example here. Let’s say you have a client and you could tell that it’s going to be a headache.
However, you have to pay your bills, so you need to take that client on, and in this case, you accept the risk that it might be a huge pain in the butt and you don’t really wanna work with a person. Maybe there’s a personality clash. Maybe there’s another issue, but you accept that risk. That it, it could be a real pain to work with this person because you have to keep your business going and you wanna keep, you know, keep the business running for another day.
So, totally acceptable. I’ve done this before, and sometimes you just have to accept the risk and keep moving forward. Another one could be the risk of a change in the algorithm. Whatever platform you’re working on, there could be a change. And the thing is, if you’re earning money from it and the cash flow is good, maybe you just have to accept that risk and you can do some other things to maybe mitigate the, the impact, for example, so you accept the risk, but maybe you try to mitigate the impact of a commission rate change by earning money in different areas that are independent of that risk.
So we have this list of risks. You’re going through it on a periodic basis, and you’re. Reviewing the probabilities and the impacts, and you’re adding to the list as you learn and get more information. So you have this list and sometimes things can fall off and you’re like, ah, this is not a risk anymore.
Goes away. Great. Maybe the probability gets lower as time goes on. Super likely, depending on what it is, the probability could go up and you have to update and address things as you go. But. When a risk actually happens, then it becomes an issue. And these go hand in hand. So you have an issue that you need to deal with and basically this will happen.
You will have to, to figure out what to do. There’s a couple things that can help out. Number one, almost always a financial buffer is going to help. So this could be expenses that are set aside as savings. I, I phrased that poorly here. This could be having a buffer, having money set aside that can cover your expenses for a certain amount of time.
This is sort of like an emergency fund in the personal finance world. So maybe you set aside three or six months where you’re able to keep running the business even if more revenue is not coming in. You can’t do this, uh, on day one most likely. So this could be a thing where you have some money that you, you save from your cashflow to make sure you have a buffer in case of issues in the future, if this is a, you know, an agency or anything with clients where you have a pipeline of potential clients, then there’s always like the, the ebb and flow and the.
I guess unpredictability of your revenue and income based on many external factors. So having the financial buffer is super helpful. Another buffer is, uh, time and scheduling. So most of the time your estimate of how long something will take is wrong. Usually things take longer and they’re harder than what you think.
They will be. So if you are working with a client and you’re thinking, all right, this is probably gonna take me five days, maybe. You give them an estimate of eight or 10 to make sure that you’re able to deliver on the timeframe that you told them. If you deliver early, that’s great. One thing you can consider is your other workload.
Maybe the specific work has a dependency on other contractors. Like you can’t complete your work until other people complete theirs, so maybe you wanna build a little bit of a buffer in with that. But these risks that. Do turn into issues. You usually almost always benefit from having a little more time, a little breathing room.
You can make better decisions and maybe have more options if you have room in the schedule.
As we’re wrapping up, one thing to remember is it’s great to have a plan so you could plan, and this is all part of planning and thinking ahead, and part of planning is knowing that your plan is probably going to be wrong. Your schedule’s gonna be off things, uh, were not done on the timeframe that you thought or they cost more or some other external factor.
But it’s important to go through the plan and all, uh, good, like meaningful projects will probably have some risks involved and some of those risks will turn into issues. Basically, you’re not gonna be able to avoid all problems, especially the. External factors that you basically don’t have any control on, so you just have to deal with them by going through this exercise and thinking about what could happen.
What the impact of that will be. This is helpful. So you’ll be able to avoid some things or reduce the impact on the things that do actually happen. So you’re not gonna be able to avoid all issues. I mean, this is just part of life, like solving problems and there’s, uh, problems that pop up and again, external factors that you can’t do anything about.
So you just have to deal with it and hopefully if you’ve spent a little extra time on it, you’ll be better off. Solving these problems and working through the issues than you would have been if you just, you know, walked in blindly and you were optimistic, a little too optimistic, where you think, uh, nothing’s gonna go wrong.
I just need to keep doing this, and then everything will be fine. Planning ahead can definitely help. And some of these specific. Tactics and ideas like mitigation, the transference, the avoidance, and the acceptance. If you just break it down a little bit, you can address the potential issues, these risks, you can address them in the right way and maybe lower the probability.
So they don’t even happen or reduce the impact so much that it’s not a big deal if they do happen. If you have any ideas or thoughts about risk management, let me know. You could shoot me an email feedback at Doug show or over on YouTube. You can, uh, leave a comment below in a couple. I believe next week we are due for one of the lighter topics, so I don’t know what that’ll be.
And then I think in a couple weeks I’ll probably publish something about what I learned after publishing 900 podcast episodes. So we hit 600 here on this show. And then I have another show called Mile High Fi, and there’s about 300 shows there. Technically I’m probably closer to like nine 20 or something like that if I had to guess.
But who’s counting? I, I’ve goofed up the numbering and added episodes in between others who, who could really tell. But anyway, I’ll probably do one of those and yeah, it’s not gonna be 900 things. I learned about 900, uh, episodes. That’ll be too many. Maybe I could do like 10. This seems pretty good. Alright, catch you on the next episode