The Cash & Risk Continuum

2015, 11 Aug | In Build Company Value, General Management, Managing Risk, Popular

CEO’s and business owners will have too much or too little of it at some point in their company’s lifecycle. How you respond to these eventualities are critical to your company’s success as well as your personal and professional development.

Inherent in the management of any business, there is a dynamic interplay between cash and risk as you progress through the lifecycle of your business. The common denominator is that, you as an individual or manager, are the driver of both these business levers.

Cash simply stated is the blood pumping through your business that fuels your ability to execute on your business objectives. If you have too much you are susceptible to certain risks. If you have too little you are susceptible to other risks.

Risk is a result of decisions (most often as it relates to the use of cash/debt) you make in the stewardship of the business and its resources as well as the risks the marketplace or competitors impose upon you.

Many of us like to operate in what I would call the center of the Cash:Risk Continuum – the comfort zone, where cash is adequate and risk is tolerable and we have, within our managerial tool box, reasonable answers to the marketplace’s and competitor’s business challenges.

By now you are probably questioning my sanity as it relates to too much cash; however risks abound with either scenario. Opportunities also exist, which must be balanced – i.e., does one spend the cash to pursue a business opportunity.

The risks associated with too little cash are well documented, however consider for example: How do I invest excess cash? Do I support the core business? Do I branch out (in what direction?)? Do I take chips ($$) off the table or issue greater dividends? Do I acquire a competitor? Or do I stock pile for a rainy day? Needless to say any time we get outside our comfort zone there is increased risk.

Despite our best efforts to keep our business or ourselves operating within our comfort zone, fortunately or unfortunately, the marketplace has a way of disrupting our comfort zone and often “growing us up” in the process.

Even if we feel we are still in our comfort zone consider the following marketplace shifts and the effect on our management psyche and possible responses.

Managing this ongoing dance whenever we enter the risk area or venture outside our personal or managerial comfort zone, we need wise council and deliberate advice to help us navigate these times. Our best decision relies on self-awareness and realizing we are outside of our comfort zone and perhaps skill set. I think Clint Eastwood said it best, “a man’s got to know his limitations”.

As experience is the best teacher, it is recommended when you enter the risk area to bring in an outside experienced advisor with the personal and professional goals to help you:

  1. Make wise choices outside your comfort zone.
  2. Increase the boundaries of your comfort zone.
  3. Increase the odds of achieving best results, ROI, and longevity for the business and for you personally.

Increasing your cash and risk IQ to get the tools you need, and personal and managerial EQ (Emotional Intelligence Quotient) to know when you need help, is a key to expanding any executives comfort zone when dealing with business challenges.

If the right help is chosen your Cash: Risk continuum should look more like this regardless of market forces.


Steve Szirmai, Principal with the Merit Harbor Group, is a Finance and Operations professional with 25+ years of experience in roles such as CFO, Controller, COO, among others, with both large and small organizations, including Chase, HSBC, WestLB and Microsoft, in both domestic and international markets. He focuses on enhancing and optimizing Enterprise Value for Owners and Managers in the Finance and Operations arenas, as well as Strategic issues, Board Advisor and Executive coaching. Steve brings a unique mix of real world experience, along with innovative and creative approaches to resolving difficult management challenges.