Questions and Answers

Due to recent fluctuations in raw materials cost, our team wants to spend more time evaluating threats this year. Can you suggest ways to make this productive?

After you have complete the Threats exercise (4.6 in the templates) select the threats that have both high probability and high impact on your business and develop answers to the following questions:

• Is there any way we can Prevent this threat from happening?
• How can we Reduce our Exposure to this threat?
• What are some Early Warning signs?
• Do we have Contingency plans in place?
• Is there any way to mitigate the threat's impact through Hedging?

In addition to answering the above questions for the significant threats, you may want to evaluate different possible scenarios as a Strategic Issue. Take each viable scenario and develop your firm's course of action. As you review the scenarios and the answers to the above questions, assess whether you have some steps that need to be included in the Internal Development section of the Strategy (5.4).

After adding the relevant points to the Strategy, assess whether or not one or more of these should become objectives to be completed in the next 12-18 months. A good example of a plan to meet changing raw materials prices is the plan set in place by Southwest Airlines to buy futures contracts for jet fuel. They were able to lower their fuel costs and continue to effectively compete with other airlines that did not have a plan or who could not implement a plan due to poor cash flow.

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