Don’t bungee jump without a rope!

"The ordinary rate of profit always rises more or less with the risk. It does not, however, seem to rise in proportion to it, or so as to compensate it completely."
 
So said the famous economist Adam Smith as he set out to define the blueprint for a wealthy nation.   Sadly 240 years later we still haven’t found the right formula and this is underpinned in the latest official figures which show average profit within the manufacturing sector falling back to levels of around 5.5% in Q3 2015, the lowest rate since 2012.  
 
A key theme of the BWF in 2016 is Risk.  This is not to be negative, indeed, as Adam Smith (somewhat labourously points out), risk is a fundamental requirement of business.  But, this is not blind acceptance of risk, it is effective identification, control and mitigation – it is checking the bungee cord is attached and operational before you jump.  
 
The failure of the Leaderflush Shapland business at the start of this year is a timely reminder of risk.  The full story will unfold in the coming weeks (alongside the usual deluge of speculation, anecdotal evidence and blame), but reports in the press point to payment terms, project delays, unforeseen problems (see the chart below for the plight of wood manufacturing over the last decade) and investor assessment of risk.  The supply chain up and down stream is de-risking and in this the joiner can often assume more risk than is fair or indeed more than we are rewarded for – the buck (or lack of bucks) all to often seems to stop here!
 
The Chancellor opened the year reminding us of the risks to sustained economic growth and this is sensible; the market remains buoyant and it is the right time as a sector and as individual companies to identify our risks, be they legislative, financial, people, procedural or technical and then, when that sideswipe does come on a Tuesday afternoon, when we are least expecting it, we are in a robust shape to deal with problems and when selling our wares we are able to explain how our knowledge, experience, robust processes, testing, certification, great team and core values ensure that we manage our risks, but more than this we take care of theirs.  This is how a supply chain adds value and hence commands value.  
 
At BWF our mission is to help members to trade more profitably and a vital part of this is helping to identify and manage member risk.  Through our day-to-day work we are scanning the horizon for risk, sometimes seeing it off at the pass with our lobbying, sometimes preparing the sector for the inevitable (see work on Part Q of the Building Regulations or the CE Marking of fire doorsets).  Through our work in accreditation or certification or with insurers we offer direct risk mitigation options, through our information library and training we add knowledge and resilience to member businesses and through our H&S Hero campaign we look to avoid it altogether.  If all else fails, our helplines are there to deal with the more immediate threats, back-up as and when needed.  
 
As we peer ahead into 2016 there is risk on the horizon, but rest assured there is huge opportunity too and 2016 whilst it probably won't be quite as exhilarating as bungee jumping, it may be as bumpy, so check your bungee rope and remember that the BWF is here to help, you don't have to leap into the darkness on your own.

This article first appeared in Woodworking News.