How To Mitigate Business Risk On A Large Scale

by | Jan 31, 2018 | Business Feature

Every business, whether a global name or small start-up, faces risks that could significantly threaten their success, which is why it is paramount that any company invests in good risk management. Business that identify the risks they may face, whether it is now or five years down the line, will be far better prepared than those that ignore new and coming challenges. Whilst this can be undoubtedly difficult, luckily there is more help available than ever from companies such as NEX Group to assist institutions in efficiently managing their risks and optimising their resources in order to expand. However, we’ve looked deeper at how companies can mitigate business risk on a large scale, so read on to find out.

The Types Of Risk Your Business Faces

As mentioned previously, every business will face risk that could considerably threaten its success. In order to manage these risks successfully, it is paramount that you understand the types of risks you need to protect your business from.

The main categories of risk you must consider include:

  • Strategic – g. a competitors joining the market
  • Compliance –g. the implementation of a new legislation
  • Financial –g. increased interest charges or taxation
  • Operational –g. theft or breakdown of equipment

Whilst these are the main categories of risk you must consider, it is paramount that you understand that some may fall into more than one category, if not all four. More general risks include:

  • Environmental risks
  • Employee risk management
  • Political and economic instability
  • Research and development

How To Mitigate Business Risk On A Large Scale

Mitigating business risk on a large scale can be challenging. After all, who knows what the future may hold? Whilst you cannot predict the future market, it is paramount that your business does its utmost to reduce the risk for business regardless.

Strategic Risk Management

Strategic risk management involves the process of identifying, quantifying and mitigating risks that may affect a businesses strategy or strategic objectives and the execution of them. When it comes to understanding how to manage risk, you want to consider how changes in consumer demand and preferences – competitive pressure and technological changes, for example – may affect a business’s success. Ultimately, the best way to manage this risk is to measure it! Strategic risk in particular can be measured by taking the economic capital and risk-adjusted return on capital (RAROC). With this information, you can establish key performance indicators (KPIs) and identify the risks that may affect performance in order to gain better insight to the dangers and opportunities that your business faces.

Compliance & Regulatory Risk Management

When it comes to mitigating business risk on a large scale, it is paramount that you are aware of the increasing importance of compliance. Compliance and regulatory risk management are essential for all businesses, including yours. By implementing a Corporate Compliance Program, you can rest assured that your organisation will be able to successfully maintain compliance in areas of operation across the board, and ultimately prevent your employees breaking the law unintentionally.

Financial Risk Management

Under-pricing solutions, hiring without the required funds available, borrowing money, depending on one revenue source and appointing too many overhead positions are just five of many financial risks businesses commonly face. Utilising financial risk management for your business is paramount to avoiding these common occurrences, and will ultimately help you identify the financial risks you may face. Moreover, financial risk management will also help you measure the potential level of impact, enabling you to determine a strategy to successfully address the risk(s) your business is or could be facing.

Operational Risk Management

Operational Risk Management (ORM) is vital when it comes to mitigating risk on a large scale. In fact, the importance of operational risk management is important to understand, and for good reason. Ultimately, the purpose of operational risk management is to help reduce, if not avoid, potentially destructive business risks, and involves conducting a risk assessment. Once you have identified, analysed, evaluated and treated the risk, it is paramount that you monitor and review the risk on a regular basis in order to avoid the threat returning.

In order to successfully mitigate business risk on a large scale, it is paramount to understand the risks your business may face whether it is now or in the future. Regardless, your business will ultimately face risks in four main areas, which are: strategic, compliance, financial and operational. In order to avoid these risks, it is vital that you understand the importance of risk management.


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