Articles

Managing Risks for Enterprises

by Arthur L. GRC analyst

Have you ever stopped to analyse if your company does an efficient financial risk management? Your answer is likely to be no. This is a part that is often overlooked by managers and entrepreneurs, but fundamental to organizational success. 

After all, it is through this attitude that you can deal with fluctuations and unpredictability in the market, in addition to predicting changes, reducing negative impacts and knowing how to react appropriately to an unexpected event. Uncertainties also decrease and decision making becomes more accurate.

What is financial risk management? 

Every activity involves risks. According to the Michaelis Online Dictionary, this word means: “possibility of prejudice or failure in a certain undertaking, project, thing, etc. due to an uncertain event, regardless of the will of those involved”. 

When we talk specifically about the financial side, the idea of ​​managing risks is to analyse and measure them to identify the potential for losses arising from market movements. This process is done through probabilities and statistics, which identify the situations that can negatively impact the business. 

In simple terms, managing financial risks aims to reduce the effects caused by the market. It is, therefore, a managerial measure such as a compliance risk management software allows your company to be prepared for any changes that occur in the business environment. 

However, this attitude goes further. It can help your company define the policy for accepting financial risks. What does that mean? In practice, this document will help the manager or the entrepreneur to make decisions based on tolerance to the damage that can be caused by the path that will be followed. 

What you may be asking yourself right now is: what are the financial risks that a company takes? They are always related to financial operations. Therefore, they include poor cash flow management and lower than expected returns on investments and other transactions. 

Some typical examples are: 

  • -inadequate administration of finances. 

  • -high indebtedness. 

  • -exposure of the company to interest rates or exchange variations. 

  • -market operations and investments with a high level of uncertainty -regarding return. 

  • -low quality of information that determines decision making.

It is important to highlight that every risk needs to be analysed so that its potential for loss is identified. It is only in this way that the entrepreneur can protect himself from possible damage and avoid major inconvenience to his organization.

Best of all, risk analysis and management are measures that should be adopted by any company, regardless of size or industry, this can be done by using risk management system. In fact, it is precisely in small and medium enterprises that the absence of financial planning is most noticeable. 

In the case of SMEs, it is worth considering market data and other indicators, especially those related to people management.


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About Arthur L. Freshman   GRC analyst

9 connections, 0 recommendations, 42 honor points.
Joined APSense since, December 11th, 2019, From Austin, United States.

Created on Feb 12th 2020 11:26. Viewed 368 times.

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