The long term risks of short term fixes

Welcome. Today I’m going to talk about the long-term risks of short-term fixes. And this is really quite an issue for a number of organisations both in the public and the private sector.

What we find often when we have an event or we start to see some issues within the organisation, we look to either divert money from something else to deal with that situation or we actually cut our budgets. Unfortunately, in doing that, we can create some really long-term risks that potentially aren’t going to happen for another five to ten years but they are going to happen.

I’ll give you an example. Let’s say we have an organisation involved in facilities maintenance. Let’s say that that particular organisation has had its budget cut by 20%. So, the organisation thinks ‘We’ve had our budget cut from one billion dollars down to eight hundred million, what aren’t we going to do? What are those two hundred million dollars’ worth of jobs that we are not going to do in terms of maintaining our facilities?’

The problem that we’ve got there is we’ve got that short-term focus; we’re not looking at the fact that by not maintaining those facilities, they are going to degrade a lot quicker. What that means is that we are going to need to have capital expenditure on those facilities a few years’ earlier than we’d anticipated or budget. So that two hundred million dollars that we are taking out of the budget here could result in five, six or seven million dollar expenditure in say five to ten years.

So the message out of all this is when you do have these short-term fixes to overcome a budget shortfall or overcome a change in priorities, what you need to do is understand what the longer term risks are, and do a full cost-benefit analysis. Otherwise you’re robbing Peter to pay Paul. But the problem is that you’re actually robbing Peter in the sense of maybe five hundred million dollars but only paying him back two hundred million dollars.  So you’re going to end up with a deficit at some point in time.

So I encourage you to make sure, when you’ve got those short-term fixes, look at the long term risks and understand whether you are going to be able to afford them then. That’s all for today, let’s be careful out there.