A Halloween Story About Black Swans

Happy Halloween! We will be enjoying a Halloween tradition in our house, with wine, snacks and finding the cheesiest and worst scary movies we haven’t seen yet.  This is the one day of the year we welcome fear, literally opening the door and inviting it in.  In business, however, fear is most definitely not welcomed.  

Black Swan

“Everyone has a plan until they get punched in the face.”  Mike Tyson

The worst business and/or personal event that all of us have experienced in recent times was the impact of the Covid-19 lockdown.  For many of my clients at the time, we had a plan, but Covid most definitely punched us in the face.  No one had prepared for an event with this impact; why would they have? What I did observe though was, whilst you cannot predict the next punch, you can definitely strengthen your guard.  That’s the difference between fragile and resilient.The term Black Swan originates from finance professor Nassim Nicholas Taleb; it is now synonymous for rare, unpredictable events with massive consequences.These are  the things that can absolutely blindside you:

• The client who suddenly vanishes.
• The key supplier who folds overnight.
• The employee you are completely dependent on who burns out.
• The new market regulation that changes everything.

Risk registers tend to list what we already fear. The Black Swans are the shocks that never made the list in the first place.  Covid was a Black Swan for all of us.Resilience isn’t about trying to predict every possible surprise,  it’s about being able to absorb and adapt if, and when, they do arrive.  The goal isn’t to build a perfect plan.   It’s to build a business that can take your Mike Tyson punch and still stay standing.

The CFO Lens: Designing for the Unpredictable

Build Financial Shock Absorbers

• Recap of last week’s article on cash forecasting. “A Cash Guide for a Good Night’s Sleep”
• Keep a cash buffer that covers 2–3 months of fixed costs.
• Secure access to liquidity via overdraft, lending facility, or keeping investors warm.
• Separate operating cash from contingency cash so you know what’s truly safe.

Create Operational Redundancy

• Cross-train staff so key processes are never dependent on one person.
• Document and delegate what matters. If you disappeared for two weeks, would the business still run?
• Diversify clients and suppliers. Dependency is very often a risk disguised as convenience.

Define Decision Triggers

• Agree in advance what metrics trigger action e.g. cash under £X, sales pipeline below Y%.
• Pre-decide what and where you’ll cut, protect, or accelerate before emotions take over.

Strengthen Information Flow

• Review cash and pipeline weekly, not monthly.
• Use dashboards to spot early warning signs.

Rehearse the Unthinkable

• Run a black swan drill via forecasting scenario exercises:
  • What if your top client disappears?
  • What if sales halve overnight?
  • What if the 3 best performers in the management team leave?
• Walk through your plan to agree the processes required and understand the impact to avoid.

Simple Actions to Get Moving

• List your dependencies. Who or what could you not afford to lose?
• Run a stress test. What happens if income drops 30% for three months?
• Check your access to credit. When you don’t need it, banks are generous.
• Audit your insurance contracts. Ensure changes in the business are covered.
• Schedule a resilience review. Once a year and build it into forecasting and strategy reviews. Call it your black swan drill.

Closing Thought

Mike Tyson was right: Everyone has a plan until they get punched in the face.  In business, those punches come as market shocks, lost clients, or unexpected costs. You can’t ever stop them, but you can train for them.  Resilience isn’t about fearlessness. It’s about design.So this Halloween, while everyone else is chasing ghosts, take an hour to look at your own business: cash, dependencies, and assumptions.Because the scariest thing in business isn’t what you can see.  It’s what you haven’t prepared for.

Main Image Credit: Photo by Mae Black