If you’re hoping your equipment doesn’t fail, your employees don’t quit, and your customers won’t churn, you’re doing it wrong.
Hope is not a risk management strategy—not for Fortune 500 companies and not for your small-to-mid-sized CNC business.
So, don’t wait for a crisis to occur before you start strategizing.
Establish the proper risk management protocols now, and you’ll not only mitigate your risks but also enhance your rewards.
Here’s how to do it.
Risk Management Demands Preparation
When is the best time to buy an umbrella? A sunny day—before the storm blows in. Likewise, the best time for machine shop management to prepare for a problem is when the shop is running smoothly.
The preparation is absurdly simple, yet too few modern CNC machine shops take the necessary steps:
- Establish savings so you can quickly repair or replace a downed machine
- Build your network so you’ll have someone to call on for help when a valued employee needs a month off work to recover from illness
- Expand your capabilities so you’ll still have plenty of work coming in when your biggest customer ends their contract
Set up your safety net long before you find yourself in a freefall, and you’ll be secure and confident when a crisis comes calling.
Risk Management Is Not Reactive
If you’ve ever been reassured that “this, too, shall pass,” keep in mind that the adage applies across the board. Nothing lasts forever—not the bad stuff, not the good stuff.
And reacting in the heat of the moment is the worst way to recover from a bad situation or optimize a good one.
We’ve seen plenty of CNC businesses react to scenarios both bad and good, and it’s never pretty.
When a machine shop management team reacts to good news, they:
- Spend all their profits on “manufacturing improvements”
- Take on more work than their shop can reasonably sustain
- Neglect the relationships that keep their companies secure
When a modern CNC machine shop reacts to bad news, they:
- Throw money at problems that didn’t have to cost a dime
- Turn down premium opportunities due to overwhelm
- Abandon key relationships out of fear of judgment
Proactive preparation, on the other hand, allows you to remain focused on your big-picture goals and manage any occurrence with predetermined processes.
Risk Management Depends on Your Next Decision
We’ve said it before, and we’ll say it again: when you encounter a crisis, your very next decision is the most important one because it establishes your course of action.
If you’re facing the ocean when you take that first step, guess where you’ll wind up?
So unless you have a superyacht waiting for you, you’ll be much better off pausing for a moment, an hour, or a day to consider your next move.
Lean into your trusted network for guidance and advice. Trust your team to do what they do best. And open yourself to unconventional solutions that you haven’t yet considered.
Dashing off in the wrong direction can turn a difficult situation into a full-blown disaster.
Risk Management Requires Ongoing Evaluation
Risk management isn’t a one-and-done plan that you put in place and file away. Your machine shop management team should continually assess the company for risk and identify feasible solutions.
Risk management means keeping tabs on which machines are likely to need repairs, which team members are planning to retire, and which customers will soon be reallocating the services you provide to their own in-house team. Risk management is an ongoing process of documentation, communication, and industry awareness.
Nobody solves a problem like a manufacturer
The COVID-19 crisis is a prime example of savvy business owners leveraging a risk management mindset to keep their CNC businesses afloat during a tremendously trying time.
Even before the government instituted mask mandates, proactive shops were protecting their employees with PPE and staggered shift schedules. In companies where machine shop management anticipated the risk of a pandemic, employees were less likely to become ill and more likely to feel safe coming to work.
As a result, 98% of NTMA member businesses remained open throughout the pandemic, paying their employees, serving their customers, and keeping American manufacturing alive.
Risk Management Highlights the Power of Community
If we learn anything in a crisis, it’s that modern CNC machine shops thrive in community with one another.
As small business owners and workers, we desperately need one another’s insights, advice, assistance, and, most of all, friendship. Every single manufacturer, from machine shop management executives to the greenest front-line workers, deserves a safe space to ask questions, vent frustrations, and share wins.
It’s not enough to read blog posts (though we think ours are pretty great). You and your team need the constant engagement of NTMA Connect, the personal interaction of NTMA Chapter meetings and ENGAGE conferences, and the genuine hope of sustained success that people glean from authentic relationships with like-minded colleagues.
“Hope” may not be a risk management strategy, but it does keep you on the path toward success when you feel like the sky is falling down around you.