Ten Things Every CEO Must Know About Sales Risks

With 2010 fading in the rear-view mirror, CEO’s are asking “what risks do we need to anticipate, and what opportunities must we capitalize on to achieve our strategy in 2011 and beyond?” The top business stories of 2010 included emerging developments that percolate into portfolios of selling risks, including China, zero waste, and supply chain efficiency. Not every CEO has time to understand every nuance, but here are ten things CEO’s must know about sales risk:

1. There is a clear linkage between sales risk management and financial performance. Reduced sales risks contribute to higher sales productivity, shorter sales cycles, more accurate forecasts, and lower inventory costs.

2. Sales risk management belongs in the executive suite, not just in sales. Sales risks are enterprise risks. Sales risks aggregate, so the risks individual sales people encounter every meeting, every conversation, every interaction, every day, matter.

3. You can’t figure out your risks without knowing what your sales team must deliver to your company and to your customers. Ask your colleagues and your sales team, and see whether the answers are consistent. Most sales teams must contribute more than revenue, because salespeople are often required to deliver profits, customer satisfaction, market intelligence, and sustainable customer relationships.

4. Sales risks are becoming more complicated. Technological innovation, developments in social media, globalization, world events, and the accelerating pace of commerce and communication all contribute to growing numbers of risks and to their increased complexity.

5. Effective Enterprise Risk Management requires governance of lead qualification policies and procedures. If lead qualification practices are inconsistent, or if salespeople accept too much risk—or too little—your financial strategy is at risk.

6. Focusing on preventing familiar risks won’t protect you from blind-side tackles. Sure, everyone knows about economic and competitive pressure, but while you’ve been reading this, at least a dozen sales opportunities tanked because unanticipated events derailed the effort. In fact, in the 2010 Sales Risk Survey I conducted with CustomerThink, over 40% of sales executives reported that unanticipated situations caused one or more lost sales opportunities.

7. Transferring risks doesn’t reduce them. Hedging your bets through a channel sales program or staffing full-commission sales people provides some risk relief, but it’s superficial. If your sales partners can’t achieve their revenue plan, neither can you.

8. Ethical risks and social media risks are intertwined—and bigger than you think. Companies that turn staff loose on Facebook, Twitter, and blogs absent any guidelines will experience at least one related boardroom discussion this year, and it probably won’t be pleasant. In addition, the impact of negative social media sentiment on your company and your brand could be catastrophic, unless you plan what to do right now.

9. Risks create opportunities. Not all risks need to be avoided. Through more accurate and timely information, your company might embrace a certain type of risk because of a unique capability or advantage you have developed to manage it.

10. As with any risk, your strategic options are adapt, innovate, or mitigate. Adapt to what you must accept, namely that prospective customers might not purchase. Innovate new ways to gain proprietary advantages. Mitigate the risks that have the highest likelihood and highest impact.