Risk management in companies: 5 tips to do it efficiently

 Risk management in companies is one of the essential measures for the longevity of the business. This is because it guarantees the ability to deal a little better with the unpredictability of the market. In addition to providing security in the execution of operational processes.

However, implementing it is not so simple, not only because you need to know its fundamentals, but also because you need to invest in different tools and control strategies. With that in mind, today, we are going to explain everything you need to know about risk management. John Labunski Dallas!

 What is risk management?

 Risk management is the combination of a series of identification, assessment and control processes to avoid, manage or transfer risks. It is a fundamental activity for all companies, regardless of the phases of their life cycle, being a continuous process and not one-off.

 For example, imagine a small business that manufactures electronic components, especially parts for cell phones. However, there is a crisis in the raw material of chips. At the moment, the company still has enough inventory for a month, but it doesn't know how it will handle the next ones. We can call this whole situation a risk that came true.

 Now imagine if that same company had prepared a year's worth of inventory, calculating demand by the average of last year's orders. Probably, they would not have to worry if the situation in the previous paragraph happened and they could increase the competitive advantage, as they prevented themselves.

 Why is risk management important?

 Risk is characterized by being a potential problem, that is, a bad or complicated situation that can happen. Depending on your stage in the business, it may affect resource capacity for activities.

 Therefore, nothing is more important than having mechanisms to make its impact less harmful to the company's life cycle. That's why risk management is such an important tool. It helps to avoid and reduce risks, including containing the possible losses caused by these events and providing mechanisms for them to be predicted and monitored.

 Types of financial risks

 There are different types of risks that a company can face. From those considered controllable, such as equipment breakdown or work accidents, to uncontrollable ones, which are more related to external market conditions and also to finances? Here they range from consumer defaults, to an economic crisis or, as we have seen in recent years, the coronavirus pandemic .

 How to carry out risk management in the company? Discover 5 steps!

 Luckily, risk management is an activity that any company can do. The most important thing is to know the main steps and develop a periodic system of work. To help you in this process, we have separated the main steps to implement it in your company. Check out!

 1. Plan ahead

 The first step is to plan your business operations. It can be done either at the end or at the beginning of the year, but the idea here is that the management has a direction. At this point, some questions must be answered: where does the company intend to be at the end of the year? What are the plans for finances? What situations or behaviors does the business want to avoid? Among others.

 2. Identify and classify risks

A fundamental step for risk management is to know the company. This is because, knowing about the business processes and operations in detail, it is possible to understand what their weaknesses and vulnerabilities are.

 As we explained in previous topics, risk has a direct relationship with a potential problem, so looking at the sensitive aspects of the company can point to the emergence of these situations.

 3. Perform a qualitative and quantitative analysis

 Both qualitative and quantitative analysis are important tools for understanding business operations in a structured way.

 The first helps to define the level of impact that each risk has for, in addition to its probability. The second helps to measure the possible effects of situations already identified. Therefore, both work as tools to extract data that will help to decide what is the best conduct for the business.

 4. Carry out risk treatment

 After collecting and analyzing data and identifying what the risks are, it's time for management to start a treatment work. That is, defining a management plan to help the company deal with these unpredictability. At this point, it will be interesting to determine some guidelines based on five types of conduct: avoid, retain, reduce, transfer and exploit risk.

 5. Perform monitoring

 With the defined treatment, it will be up to the company to maintain a vigilance conduct in the face of these situations. Not only the exposed risks, but also the possibilities. It will be important to determine, at this stage, both management capabilities and actions to continue to keep the risk level low. Some types of tools are: reports, management software, performance indicators, whistle blowing channel, creation of internal policies, among others.

 Why should risk management be connected with collection management?

 When we talk about delinquency, especially from consumers, we know that there is a great risk involved. After all, the lack of payment results in amounts that the company expected to receive. Its non-existence has a huge impact on the company's balance sheet and, consequently, on its investments and plans.

 Therefore, using tools, or even having a collection service, is a way of facing this risk head on and mitigating its impact. This management ends up becoming an ally not only for the company to receive its payments properly, but to be able to handle its finances without problems.

 Risk management in companies plays an important role in ensuring the longevity of the business. More than a strategy with John Labunski, it is a behavior that must be periodically maintained. Therefore, it is very important that the company invests in a management plan, taking into account the possibilities of risk. In addition, understanding that having control of your collections is essential to properly implement risk management and avoid financial problems in the medium and long term.