Market Risk- equities and bonds, both U.S. and global- Interest Rate Risk- when your investment is sensitive to movements in interest rates, you will know it.
- Currency Risk- Having all your investments in one currency or in others either directly or by way of revenues that come from foreign countries
- Diversification Risk- It comes in two forms: one type is not being diversified enough (i.e., concentration risk), whereas the other is being ‘too diversified.’ Concentration to the point whereby if an investment goes south or to zero, it affects your net worth, lifestyle or even your mental well-being. This is a personal judgment. Over diversification amounts to investing like an index fund and not fully understanding the positions you own- in other words, being spread too thin and /or not understanding how they correlate with each other.
- Commodity risk- is your investment affected by swings in commodity prices such as energy (oil, gas & coal), precious metals (gold, silver, platinum and palladium), industrial metals (copper, zinc, etc.), agriculture (corn, soybeans, cotton, cocoa,etc.)
- Hedging- both the risk of hedging and the risk of not hedging; understanding your costs and the likely outcomes of each decision.
- Risk of fraud- can result from lack of due diligence and not doing background checks. However, if someone or a certain company wants to defraud investor,s and it is a coordinated, deliberate effort, due diligence may not be enough to detect it in advance.
- IP or patent infringement risk
- Volatility risk
- Opportunity Cost risk- being in too much cash.
- Liquidity risk
- Time Horizon risk
- Technology risk- can your business become obsolete or significantly impacted by new, unforeseen technology?
- Competitive risk
- Risk Management risk- cutting your losses vs. letting your winners run
- Leverage risk
- Execution risk
- Deposit risk- where you hold your money, whether it be at a bank, brokerage firm or prime broker
- Collectibles risk (wine, art, precious stamps, antique cars, etc.)
- Fund risk versus investing directly- they are completely different.
- Key man risk- is the company dependent on one or two key people, and is the success of the business conditional on them being involved? What if they leave?
- Act of nature risk- do they have back up or contingency plans in place in case the company and physical locations are destroyed by hurricane, tornado, earthquake, fire, or explosion.
- Insurance risk
The Five P’s ™ People – Without solid founders, key management teams, and board members, companies will not succeed. Someone once said,” I will take an ‘A’ management team with a ‘B’ product all day vs. a ‘B’ management team with an ‘A’ product. There are thousands of the latter laying at the bottom of the ocean that never made it.” People drive companies, and make the decisions that increase the chances of success, and minimize failures while de-risking every step of the way. Product – It is mission critical that companies have a unique product that will add value to its end user or customer, whether that is in the form of a water infrastructure company, a green hydrogen business, a non-profit such as water.org , etc. Next View adheres to the philosophy of not only having a competitive advantage, but a sustainable competitive advantage. Platform – A company’s infrastructure, marketing/sales strategy, technology, R&D, intellectual property/patents, and financial and accounting systems all play a role in building a successful platform. It is mission critical that a fund or company have a stable platform that will allow tan entity to scale both in size and revenue. Performance – “If you cannot measure a company, a fund, or even a non-profit's results, it is not real.” Execution of the business plan(s), achieving goals (both qualitative and quantitative), and ultimately the accountability to all stakeholders defines the performance of an emerging fund or company. Profit – While many companies have been formed, built and solid without ever having achieved profitability, this is not part of the model by which Next View Partners invests. It is a necessity to be able to determine when companies crossover to achieving positive cash flow positive, and then have the ability to execute on time with the proper amount of capital deployed. It is never a question of ‘if’ rather it is always a question of ‘when’.
The other day, I found myself in an intense conversation with a board member of a company I am currently working with about a particular employee who we both agreed was working hard, yet not getting any results. The obvious question was why, and the less obvious question was does he need to be replaced. […]
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What are you (and let’s be honest)? As far as I can tell from my almost 60 years on this planet, there are two kinds of people in the world. They are what I like to call the NET-TAKERS (NT’s) and the NET-GIVERS (NG’s). I have yet to experience or witness somebody who is right […]
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