Is your company prepared for the unexpected issues that insurance can't cover?

How are you dealing with VUCA?

This is an acronym you should become familiar with if you are tasked with protecting the assets and financial statement of your company. That includes small business owners, CEOs, COOs, and a whole bunch of people interested in the continuation of the company they work for.

VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity.

These four categories can be destructive to company goals and healthy bottom lines for all businesses. In my experience, far too few business leaders invest time in considering VUCA as part of their goal-setting and strategic planning.

We’ve seen and experienced businesses damaged by cyber-attacks, supply chain disruptions, staffing concerns, reduction in revenue, and the ongoing effects of a persistent global pandemic, to name a few.

The most popular retort I hear from business owners is that this is the reason they have insurance, as if that would wipe away all the concerns. While insurance is a great risk financing tool, it is purely reactive. Plus, it doesn’t cover every peril. Too often, important coverages are either overlooked or dismissed as too expensive. What’s really expensive is a self-insured loss that could have been financed through insurance.

It’s become easy for owners of small- to medium-sized businesses to use insurance as a crutch. Insurance doesn’t reimburse for many of the hidden costs that hamper operations and performance. Research shows that employees and leadership teams will be affected by up to 60% of their time due to being distracted by a crisis.

What are you actively doing to prepare for that next crisis event that we all know will come?

The best way to properly deal with VUCA is to be prepared in advance with a written and practiced game plan.

Let’s begin by clearly defining the components of VUCA.

Volatility: Volatility is often considered from an economic and financial markets standpoint. That is an excellent example because the health of the financial markets and economy play a critical role in every small business. There is a myriad of factors that affect the economy ranging from local legislative decisions to a growing global marketplace.

We should also include how social media platforms have become the mouthpiece of the masses, shaping public opinion, and creating higher levels of scrutiny and opportunity for businesses.

Uncertainty: The COVID-19 pandemic was and continues to be the best example of uncertainty. It’s been impossible to forecast, and even with the best efforts of a lot of smart people, we can’t handicap what the future holds. Everything from facemask and vaccine requirements to the ability to be open to the public are still being felt.

While the pandemic is an example, there are other uncertainties. Will staffing levels ever come back to what was considered a normal level? Will the supply chain conundrum be eased?

Complexity: It’s complicated. Every business needs technology to function. Technology is complex. Most small companies need employees. Staffing has become inexorably more complex. Even some of the most minute details of any business can turn complicated at light speed in today’s faster paced business world.

Ambiguity: Let’s just say that ambiguity is an enigma. It’s that mystery that unravels in real time and is impacted by the previous three categories. Ambiguity is the sum of volatility, uncertainty, and complexity, with the consequences being anxiety, stress, and foreboding.

But it’s not all bad…

Savvy business leaders understand that to find the opportunities and to defend their business, creating a game plan will help them prevent, respond to, and recover from any situation. This also includes taking advantage of opportunities that are presented them.

Here is a quick 3-step start to get you rolling with that game plan…

First, identify what you have that is exposed to damage or loss. That means property, people, revenue, information, and reputation. List them out and be comprehensive to include everything.

Second, determine what calamities most concern you. That means physical perils like fire, theft (including cyber-attacks), and water damage.

It includes human perils like workplace injuries, employee related lawsuits and staffing shortages.

It means liability issues that result in costly lawsuits and damage to the company reputation and brand.

And finally, it considers those disasters that harm your revenue generation and profit, including an economic downturn, competition, supply chain disruption, and the effects of an ongoing global pandemic.

Third, insert VUCA into the equation. As you assess the future, how do the factors of volatility, uncertainty, complexity, and ambiguity impact your plans? What hidden perils can each of them cause? How will your decision-making change?

You deal with important decisions daily. In many cases, those decisions must be acted upon quickly. How much better will your ability to lead be if you’ve considered these factors in advance?

Fear is a consequence of being unprepared. Fear will keep you from investing in people, resources, or equipment needed to meet your goals.

Fear will mask talent in yourself and your people. And fear will keep you from unleashing the power of your business.

After these three steps have been completed, there is another action item. It is to write the game plan, communicate it to your employees, and then practice it to make sure it will work when it needs to.

We wouldn’t expect a football team to perform and execute well if they never practice. How can you expect your business to carry out its crisis game plan if it never practices?

Bottom line, VUCA is a real and a potentially damaging concern for all business leaders but does not have to be an impediment.

Investing in the planning, implementation, monitoring and practicing of a game plan will keep you moving forward regardless of the situation.

Dan Weedin is a strategist, speaker, author and executive coach. He helps small business and middle market business leaders and entrepreneurs to grow more profitably and create a better life. He was inducted into the Million Dollar Consultant™ Hall of Fame in 2012. You can reach Dan at 360-271-1592; e-mail at dan@danweedin.com or visit his web site at www.DanWeedin.com.

This article originally appeared on Kitsap Sun: Dan Weedin: Are you ready for the crisis insurance can't cover?