Early warning systems for business risks

My professional insights · Lyudmil Karaulanov · 5 min read

Published: 3 August 2026 · Version 1.0

The customer has paid, albeit late. The project continues, although its reserve has diminished. It is easy to end the conversation with relief and return to the next task. Everyday business has enough matters that cannot wait.

Yet the record of these small deviations is worth keeping. Not because every delay foretells a crisis, but because a succession of them may tell us something that an isolated incident does not. Early warning is valuable when it gives us time to understand the change and choose a response.

What deserves your attention?

Not everything can be monitored with equal intensity. For me, the starting point is dependencies that can materially affect the business: important customers and suppliers, major projects, financing, key people and decision-making rules.

Each area needs indicators to monitor, acceptable deviations, a point for review and someone to undertake it. Thresholds make sense when they reflect the particular activity. They support judgement without replacing it.

When a business partner's behaviour changes

Longer payment periods, more frequent requests for extensions and growing orders without additional guarantees deserve to be considered together. There may be an innocent explanation. That is precisely why the first step is verification, not accusation.

Average delay, the amount of trade credit extended, changes in ownership and management, and patterns of communication can all be revealing. When signals accumulate significantly, a lower limit, advance payment, a guarantee or temporary restrictions on supplies may be needed. It is helpful to know beforehand who is authorised to make that decision.

Reviewing a project while it can still be changed

No one begins an investment wanting to stop halfway through. That is why reassessment conditions are more useful when agreed in advance: a baseline budget, maximum deviation, review dates, expected return and a financing limit.

Every new expense can then be discussed against this framework. What has already been invested deserves to be accounted for, but does not in itself explain why the next investment will be sound.

The convenience of relying on one person

A reliable specialist saves everyone time. The same may be true of the main supplier or the bank that knows your business. These relationships have value. Alongside that value, however, lies the question of how much of the activity depends on them.

It is useful to see the largest customer's share of revenue, the concentration of financing, processes with no substitute and assets exposed to a common risk. With people, keeping knowledge to themselves or struggling to delegate is a reason for a conversation and better work organisation. It is not proof of an intention to leave.

What do our own exceptions tell us?

Sometimes a decision outside the usual procedure is necessary. If it recurs, the question is whether the rule is unsuitable or controls are being bypassed. Payments above the limit, contracts without the required review, transactions split into smaller parts and access permissions remaining active after roles change can have significant consequences.

The reason matters too. A prohibition without a workable procedure may merely move exceptions out of management's sight.

Who brings the separate observations together?

Accounting sees the payments, the salesperson hears the customer, the lawyer notices the changed terms. If no one compares this information, everyone may have done their job and the overall risk may still go unrecognised.

It therefore needs to be clear who collects the information, when the matter reaches management and how the decision is recorded. Crossing a threshold may trigger a pause pending fresh approval, an additional check or preparation of a substitute. What matters is that the signal leads to follow-up, with someone responsible for it.

Where is the point of instability?

What this concept means →

It lies where information exists but remains in separate conversations and memories. Or reaches a report after which nothing changes.

Good prevention rarely provides a reason to celebrate. Customer risk has been limited, a contract amended, knowledge passed on in time. Any loss avoided is difficult to prove. What can be seen, however, is whether the organisation has learnt something and whether it now has more time and options to respond. To me, that is a sufficiently meaningful result.

This material is of a general analytical nature and does not constitute individual legal, tax, financial or investment advice.