19. R&O: Risks & Opportunities
The Line, The Wobble, and The Plan: R&Os Matter More Than You Think
Last blog, we talked about the Hubble Space Telescope and how one wrong assumption - that mirror ground to incorrect specifications - cost over $50 million to fix.
In IBP - just like the Hubble - even when your assumptions are sound, the future still wobbles.
Markets shift. Suppliers stumble. Competitors are out to get you. Your carefully crafted forecast - that line pointing confidently into the future - gets pushed by reality.
Smart companies understand that managing the wobble is where the real planning work happens - that's Risks and Opportunities.
Your Forecast Isn't a Promise
Think of your demand forecast as a line drawn into the future. It's based on your best assumptions about market conditions, customer behaviour, competitive activity, and a dozen other factors.
But that line will move - the question is whether you're ready for it.
Risks are the things that could push you under that line. Supplier disruptions. Market contractions. Competitive attacks. The scenarios where you deliver less than planned.
Opportunities are the things that could push you over that line. New market openings. Better-than-expected customer response. The scenarios where you could deliver more than planned.
The companies that want to outperform aren't necessarily the ones with perfect forecasts - they're the ones actively managing both sides of the wobble.
A Simple One-Page Starter
If there's one thing that I am sure we will all agree on: nobody wants a 47-page risk register with probability matrices and heat maps in a Management Business Review.
I say: One page. A table. Four columns:
Risk/Opportunity - What could go wrong or right
Impact - How much it moves the needle (quantify it)
Owner - Whose name is on it (first name, last name, no hiding)
Status/Action - What's being done about it right now
That's it. Simple, scannable, actionable.
If you do this, there's a chance your CEO might even flip straight to the R&O page because it tells them what actually matters. The forecast shows the plan; the R&O page shows the reality of executing it. Of course there is a multitude of data supporting this, I don't want to alienate my Risk Management friends, but it's what matters that really matters.
Why This Works
Authenticity - You're not pulling numbers from thin air. You're showing the thinking behind the forecast. Build credibility.
Communication - Leadership likes it when you've thought through what could go wrong and what you're doing about it. It changes the conversation from "explain this number" to "how do we win?" or "what do we need to do to mitigate that risk?"
Learning - When reality diverges from plan, you trace back to which assumptions failed and which risks materialised. This creates learning rather than finger-pointing.
Accountability - Put a name against each risk and opportunity. When the CEO is watching, names focus attention quite well.
Mitigate and Seize
Here's the key: Risks and Opportunities aren't just things you list and hope for the best.
Mitigate the risks. If supplier reliability is on your risk list, what are you actually doing? Qualifying alternate suppliers? Building safety stock? The risk without the mitigation action is just worry documented.
Seize the opportunities. If there's a potential market expansion, who's working it? Who's engaging the customer? Opportunities don't materialise through hope.
The R&O page should change every cycle. Risks get mitigated and drop off. New risks emerge. Opportunities get seized (move to the forecast) or fade. The page that looks identical month after month is being ignored.
Give The Boss Skin in the Game
One more thing: assign your boss ownership of one or two items on the R&O list.
Maybe it's a strategic customer relationship that only leadership can influence. Maybe it's a regulatory risk needing executive attention.
Nothing focuses executive support quite like having their name on the status update when the full leadership team is watching.
Making It Real
Create that one-page R&O summary. Keep it simple. Five to ten items maximum, split between risks and opportunities.
Quantify the impact. "Revenue at risk: $2.3M" beats "medium probability, high impact."
Assign real names. If nobody owns it, nobody's managing it.
Update ruthlessly. Drop what's irrelevant. Add what's emerged. Show what's being done.
Present it early in your Management Business Review, right after the assumptions. It frames everything - here's our plan, here's what it's built on, here's what could wobble it.
The future will wobble. That's not a planning failure - that's reality.
The question is: are you managing the wobble, or is the wobble managing you?
Assumptions are your foundation. The forecast is your plan. Risks and opportunities are your honest assessment of what could push you off that plan - and what you're doing about it.
What's on your R&O list right now? And whose names are on it?
Want to discuss how to strengthen risk and opportunity management in your IBP process? Find me at www.planninglab.co.nz
#IBP #S&OP #BusinessPlanning #RiskManagement #SupplyChain #DemandPlanning