Externalities are events that are largely out of your control, like the weather. There can be positive externalities, such as when a major celebrity wears and promotes your fashion label on Instagram and there can be negative externalities, such as when access to your business is restricted by a major road redevelopment.
Some externalities allow time for the effected party to deal with it. At other times, a sudden announcement of a change in Government policy can be enough to send your business model into a spin.
Just because the externality generally can’t be planned for, it doesn’t mean that you shouldn’t have risk mitigation strategies in place to react and recover/capitalise on the event.
Essential to this strategy is a plan to get hold of the facts as soon as possible. There is not much point reacting to an event that doesn’t turn out to be true or is based on rumours.
The second aspect of the strategy, particularly for negative externalities, is to be as honest as possible with key stakeholders that you need to report to. If you believe that the rumoured externality has been misreported, state clearly your case and how you plan to deal with it. If the externality is real and can be verified, try to convey how you will adapt to the new situation.
At the end of the day, honesty and facts will go a lot further than spin and deception. Talking up or down the impacts of the external event only works if you can follow it up with real action.
