Establishing a marijuana business is a big undertaking. In addition to the more typical risks of doing something new, marijuana business is extra risky because it is federally illegal, there is a lot of competition and most often it is an all cash business.
Risk Management helps anticipate and develop strategies to prevent negative events from seriously impacting the project. There are four components.
- Risk Identification. This is simply developing a list of risks that may affect the business. Examples include financial, political, legal, cultural, organizational, technological and environmental.
- Risk Quantification. This assesses risk factors based on the probability that the risk will occur and the impact of the risk to the business if it does occur.
- Risk Response Development. The degree of planning for risk depends on the combined rating of probability and impact. Figure 1 illustrates the degree of planning for each risk rating using a scale of low, medium and high.
Low probability/low impact risks can be treated as a normal project assumption with no further action required. Risks that are medium or medium/low should include a mitigating strategy that describes what will be done to minimize the risk. For medium and high risks, the plan should include an outline of actions to be taken in case the mitigating strategy fails. For highly probable and highly damaging risks, the outline should include a full contingency plan. All project team members should understand, watch for and report on the presence of risk warning signs.
- Risk Control. For projects with a large number of risks, a watch list of the highest rated risks should be reviewed at each status meeting. In addition weekly status report should include the top project risks, the status of mitigating actions, newly identified risks and any changes in risks previously deemed unlikely to occur.
Treating a start up marijuana business as a project sets the stage for using risk management and other project tools to improve the likelihood that you will implement a strong business with a minimum of controversy and risk. Our next blog will be on the topic of managing an aggressive schedule.