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Managing Risk for your business to maintain success
Advisory

Ways to Implement Effective Risk Management

Risk management is an important key for a successful business. The following explains what risk management entails and ways to implement it. You will understand the advantages it brings to your company and your team.

Risk Management is important and has several benefits when cash management efforts are in place. Understand your company's limitations and opportunities and find a balance to achieve performance improvement.

- What is Risk Management

It is the process of identifying, analyzing, and prioritizing uncertainty in your company and finding ways to minimize and control these threats. They could come from a variety of sources.

Risk management in finance is effective when an investor wants to quantify a loss of any investment made and acts resulted from the risk analysis.

Risk and return are inseparable when placing an investment.

- Risk Management Process

After understanding what risk management is, we will look at the process it takes to achieve it. The steps include identifying the risks, analyze them, prioritize, identify the solution, and lastly monitor the risk.

1. Risk Identification

What risks are your organization vulnerable to? Identification is the first step. Factors such as environment, regulations, and legal risks need identification no matter how many they are.

In an organization with a risk management system, a new risk goes directly to its system and provides access to stakeholders.

The following are types of risks to look out for.

- Financial Risk

This risk involves your company's debt and fluctuation of interest rates that result in a financial loss. Create a plan that prevents misuse of cash flow. Lowering the debt should be a priority, especially with the unpredictable change in interest rates.

Depending on two clients for your bottom line could devastate the losses when one leaves. Market your business and diversify your clients for better chances

- Economic Risk

The economy is unpredictable and the inflation constant. There are positive and negative outcomes depending on seasons and trends. You can prepare for changes that will bring a predictable downturn.

Have a lean budget and save plenty for a consistent cash flow and preparation when facing economic risk.

- Fraud Risk

Technology is a platform that brings people together, but it's also an opportunity for hackers to steal information and identity. Prepare for the risk where your company can experience a breach that will bring payment fraud.

Your company is liable for breached information and fraudulence. Invest in security and fraud detection solutions and educate your staff on ways to identify potential risks.

- Compliance Risk

Regulation requirements are many in the business. Stay up-to-date with agencies such as Environmental Protection Agency and Occupational Safety and Health Administration. Avoid penalties and fines due to non-compliance.

- Reputation Risk

A single unhappy customer can tarnish your company's brand, which goes viral. Lawsuits and faulty products can add to an unappealing reputation.

Monitor online responses from your clients to be ahead of reputation risk. Provide quality responses to comments and address issues brought up. Approach each situation with the law in mind to prevent lawsuits.  

There are many more risks involved, do good research for great preparation.

2. Risk Analysis

After risk identification, find how these risks affect other factors in your company. You may find minor risks or major ones that will require your company to drop everything and tackle them first.

If your approach for risk management is manual, track the risks in every business process, policy and procedure. This framework will reveal the number of effects of each risk.

If your company applies a Risk Management Information System, it automatically identifies the effects of the new risk in your various business sectors.

3. Risk Evaluation

It is listing the risks from most to least important; prioritize the risks that affect the most functions of your business. The ranking provides a perspective on what your company should focus on. Serious risks require top management intervention while lower ones don’t.

4. Risk Treatment

Contact experts and advisory services in the field of the risks for immediate removal or containment. For a manual approach, contact the stakeholders to discuss the concerns. The challenge with the manual approach is a series of disorganized broken conversations by phone and email with various documents and financial models.

When you use the automated approach, the stakeholders receive the risk notification at once. They can use the system to discuss solutions. Top management can monitor solution suggestions and watch the progress of risk management.

5. Risk Monitoring

Compliance and economic risks are a few types that need constant monitoring because they are always present. Consistent and diligent staff do the monitoring in manual set-ups. A digital system shows immediate changes with the risks, and anyone with access can see it.

Automated systems are more efficient in monitoring than people.

- Finally

A good understanding of the risk involved in the business helps prepare for better opportunities and have a better approach to investments. A risk management plan will tackle unexpected problems and secure your business's future and its continuity.

Risk management is a priority for large organizations because they have a lot to lose. Regardless of the company size, dedicate time to implement risk solutions that will save you time and money.

See if Dryrun is a fit for you.