What do you understand for "risks" in a final recommendation?

Hello Floyd,

The risk section is maybe the most tricky part of final recommendation. In a nutshell, you should mention what are the potential roadblocks or critical points of your recommendation. As Francesco has said, try to link this part to the next step, offering a solution for the issues that you have put on the table.

More over, be careful not to mention too many potential risks: this could undermine the strength of your entire case solution. It's enough to mention of couple of them, preparing a next step linked to each one.

Best,
Luca

Hi,

First of all, Risks is not the mandatory part of the recommendation

It really depends on whether you have anything else to explore, which is more important than risks. The typical structure is the following:

1. What was the objective
2. Your recommendation
3. Arguments why the recommendation is valid (2-4 arguments) with the supporting numbers
4. Additional things you would like to explore. In the order of priority:

• Things you still need to explore / data you need to get in order to provide a valid recommendation (Very typical for McKinsey cases where the interviewer guides you and interrupts in the middle of the case to provide a conclusion
• Things you've slightly covered during the case but have not come to a particular measurable solution or were not the part of the original objective (e.g. alternative growth options or some questions on creativity)
• Risks
• Next steps

In my view, the last part (4th) of your recommendation should not be bigger than the rest of the recommendation (1-3), thus I will talk about risks if I have perfectly covered everything else in the case.

Example:

1. Our objectives were to understand why the profit is declining by X and how to bring the profit back within one year (Don't forget that your objective should be measurable in terms of money / other metric and time)
2. According to the analysis we've done so far, my recommendation is to shut down the division A and to concentrate on the divisions b/c if we want to increase the profit, and there is a number of reasons for that.. (Remember that your arguments should include numbers).
3. You provide the arguments a) First of all, problems in Division A are the major driver of the decline in profits - 90% of the decline in profits refer to Division A. b) Secondly, the decline is driven by the contracting market size that is shrinking at xx percent and is not expected to improve in the near future. c) Finally....
4. Additionally, I would like to check the option of seeling the division A products abroad. We have discussed several potential markets to enter but still have to check whether it will be feasible for us financially

Best!

You're right, typically, risk refer to the risk of your recommendation. E.g. when you are wrapping up a market entry, you could list as risks:

• Risk of competitors entering the same market at the same time
• Acceptance risk based on cultural norms & habits
• Changes in the legal framework or global trade agremeements
• etc...

However, my recommendation is typically to phrase this not as risks, but as next steps. If you haven't discussed risks of implementing your recommendation with the interviewer,it is very dangerous to just make them up during your summary. 

A better way of phrasing this is to say: "In order to quantify other risks that we didn't have the time to look at, I would suggest to do the following analyses....."

Hi Floyd,

Yes and yes!

Risks are anything that could go wrong. They are anything that the company would need to consider in moving forward with the recommendation.

As an example, with a merger, risks could be culture clash, regulatory approval, integration costs, merger synergies aren't realized etc.

As another example, any process/operational change comes with risks that your employees will be upset, that the changes cause more disruption than good, that the changes are not successful etc.

Always think about your company, the competition, and the environment in which you operate when considering risks :)

Super important final point: You need next steps. These next steps need to mitigate (i.e. manage/resolve) your risks.

Hi Floyd,

That’s a good question. Risks are everything that could compromise achieving the goal of the client (which you have hopefully met).

For example, If the case is about achieving an increase in profits and you identified possible cost cutting options, a risk is that this may impact revenues, affecting the goal.

After you have presented the risks, you can suggest some next steps to alleviate them.

Best,

Francesco