Management of Business Risks, Its Main Principles and Methods

Management of business risk deals with the identification of professional risks, their assessment, classification (depending on the priority level) and actions directed towards their minimisation. This procedure also includes monitoring & control over the potential future impact of any unfortunate business events.

At Eltoma Corporate Services, we have identified the following plan for business risk management:

  • Identification (understand the potential danger and its source).
  • Impact assessment & reduction of threatening activities and negative effects of a probable threat beforehand (if possible).
  • Determination & prioritisation/classification of existing risks.
  • Risk monitoring.
  • Creation of the most effective plan for the elimination or mitigation of danger,
  • Realisation of this plan.

Although there is no given method among experts about the ideal risk management standards (because some of the suggested methods have little to no effect on company difficulty prevention).Management of business risks is one of the best existing techniques for crisis prevention in the world.

The International Organisation for Standardisation (ISO) suggested their principles of risk management in business. According to the ISO’s approach, every risk management process should:

  • Create value.
  • Be a consolidated part of organisational processes.
  • Stemfrom business management.
  • Be a consistent and well-organised process.
  • Be problem-oriented, based on the best available business information and data.
  • Take human factors into account.
  • Be dynamic, transparent, open & ready to changes and .
  • Be orientated on continual development and improvement.
  • Be regularly re-assessed.

The main types of risks:

They can be risks that occur because of external factors; or internal that occurs within the company.

1. Market Risks management in international companies

Market risk is one of the biggest factors. It especially influences international businesses and overseas companies. This is caused by external factors – mostly macroeconomic changes (such as interest rates, commodity prices, currency exchange rates changes) – that affect company assets and may lead to their decrease. Also, if your company imports goods from China to the EU or other markets to resell, your business will be affected by changes in different regulations and international trade laws and by currency exchange risks, etc. Of course, if you own a local business, you’d better read about the types of risks and their management for small businesses.

2. Credit Risks

Credit risks are another potential business danger that occurs when contractors don’t pay the debt owed to you. It can happen very often, especially during times of economic crisis periods, when many businesses don’t have enough funds to cover their liabilities. Contact us and learn more about credit risk strategies and learn how to minimise them.

3. Operational Risks

Operational risks create the danger of waste from failed internal processes, people and systems, as well as external accidents. In some cases sub-types of operational risks may include the cases of fraud (inside and outside the company), employment and client practices, business continuity processes, etc. It should be noted that companies of any types and sizes very often underestimate or overlook this operational risks, but they are as dangerous as credit or market ones.

4. Reputational Risks

Reputation is a very important but intangible aspect of any business, thus reputational risks are as dangerous as credit, market or operational ones. This type can occur when certain events or gossips trigger negative publicity, especially unreliable talks which compromise company’s reputation and as a result bring distrust and undermine entity’s authority.

Eltoma Global suggests a unique tactics & plan for business risks management within categories described above. Management of possible and already existing risks is a special holistic, top-down, strategic approach which deals with crises prevention caused by reputational, operational, market and credit risks. We help our clients to track &identify, assess and classify (depending on the priority level) their professional risks and create action strategy for minimisation of danger.

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