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It is no surprise that oil giant BP is facing tough times thanks to what many call gross mishandling of the oil spill. But as the small sign taped to a neighborhood AM/PM store's gas pump points out, entrepreneurs are being hard hit too.

 

Convenience store franchises are big - and lucrative - business. You've got to have a great deal of capital to seriously consider owning a franchise. The AM/PM franchise requirements, for example, include the following:

 

• - Good credit record / credit history evidenced by prompt payment of all financial obligations
• - Total estimated investment: $2,583,616 - $6,661,716 (including estimated real estate costs)
• - Estimated liquid capital required $700,000 - $1,000,000
 

The BP franchise site suggests that convenience-store franchises are "available for ambitious and entrepreneurial individuals willing to assume the risks - and eager to reap the rewards - of owning their own business." My guess is that the owner of my neighborhood BP franchise never considered that "oil rig disaster" and "gulf coast cleanup" were among the risks they had assumed.

 

YOU'RE AT RISK TOO

You can't be a great leader if you do not understand the environment in which you operate. Systematically identifying your risk of loss and then taking steps to mitigate the potential impacts should be job one for managers. A good manager might even find that there is too much risk to tolerate and that it's time to move the business in another direction. If your organization employs a risk manager, he or she will have excellent knowledge to share with you.

 

To analyze your situation you can ask these questions:

 

• What kinds of losses might occur? (Consider loss of property, loss of income, loss of personnel and losses due to being found liable in a court action.)
• How likely is it that each of these losses will occur?
• If these losses did occur, how severe would each one be?
• What steps could we take to mitigate the impact this loss would have on us?
 

While the hastily created sign affixed to the pump puts some distance between the BP franchisee owner and the maligned corporation, there is more for this leader to do. He or she needs to survey the business environment and put comprehensive risk management strategies in place right away. A proactive response is best but with risk management activities, late is better than never.