Entrepreneurship is closely related to risks. A businessman may face an unscrupulous partner, the incompetence of his employees, the collapse of the bank in which he keeps his funds. Natural disasters and 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.
Instructions
Step 1
Understand the objectives of your risk management activities. One of the main goals of risk management is to create conditions for sustainable development of an 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.
Step 2
Identify the range of factors that increase the risks of business activities. The list of such negative aspects depends on the scope of the enterprise, the nature of relations with counterparties and their number, the structure of the company and the characteristics of the market in which the entrepreneur works. If a company has connections with several regions or conducts economic activity in the international market, the number of risk factors increases.
Step 3
To manage your credit risk, determine the amount of financial loss that is acceptable for you. If the trade you are planning has a high risk of loss, in excess of the limit you have set, reject it without hesitation. Such a simple measure effectively regulates the level of risk on transactions. In some cases, it is possible to manage credit risk using bank guarantees.
Step 4
Use the system of limits when considering market risks. Make it a rule not to go beyond the calculated limits when forming your investment portfolio and selling finished products. At the same time, the maximum allowable amount of losses is taken as a basis, which will allow the continued sustainable development of the enterprise without attracting additional loans.
Step 5
Take action to mitigate liquidity risks. You should start here by analyzing the company's cash flows. If the study of the movement of funds revealed significant cash gaps, eliminate them by redistributing financial flows. One of the possible measures to reduce liquidity risk is to open a credit line with a bank in advance.
Step 6
Be aware of the legal risks. Their management is recommended to build on the standardization of the process of legal registration and support of the firm's activities at each stage of the production cycle. Every significant transaction must be subject to legal due diligence. The legal department of an enterprise should not only track current changes in legislation, but also predict future changes related to the company's field of activity.
