How to manage risks

Entrepreneurship is closely associated with risks. A businessman may face an unscrupulous partner, the incompetence of his employees, the collapse of the bank in which he holds his funds. Natural disasters and the economic crisis in the country can also have a negative impact on business. To reduce the impact of negative factors, an entrepreneur should consider a risk management system.

Instruction manual

1

Understand the goals of risk management activities. One of the main goals of risk management is to create conditions for the sustainable development of the enterprise by reducing the likelihood of losing its value. A properly constructed risk management system takes into account all harmful factors that can negatively affect the company’s activities.

2

Identify the range of factors that increase the risks of business. The list of such negative aspects depends on the scope of the enterprise, the nature of relations with contractors and their number, the structure of the company and the characteristics of the market in which the entrepreneur works. If the company has connections with several regions or conducts economic activity in the international market, the number of risk factors increases.

3

To manage credit risk, determine the amount of financial loss that is acceptable to you. If the intended transaction has a high risk of losses exceeding the limit you set, reject it without hesitation. Such a simple measure effectively regulates the level of risk in transactions. In some cases, credit risk can be managed using bank guarantees.

4

Use the system of limits when taking market risks into account. Make it a rule when forming a portfolio of investments and selling finished products not to go beyond the calculated limits. In this case, the maximum allowable loss is taken as a basis, which will allow to continue the sustainable development of the enterprise without attracting additional loans.

5

Take measures to reduce liquidity risks. Start here by analyzing the company's cash flows. If the study of the movement of funds revealed significant cash gaps, eliminate them through the redistribution of financial flows. One of the possible measures to reduce the liquidity risk is to open a credit line at the bank in advance.

6

Be aware of legal risks. Their management is recommended to be built on the standardization of the process of legalization and support of the company at each stage of the production cycle. Each significant transaction must certainly undergo a legal examination. The legal service of the enterprise should not only monitor the current changes in the legislation, but also predict future changes related to the scope of the company.