In business today it is not uncommon for customers to pay for goods and services using credit. The bulk of these credit facilities have been made possible through the banking industry and its increased use of computer networks. The increased push towards globalization and expansion of markets has made the internet a major avenue worth consideration for business (Lore & Borodovsky, 2000). Similarly, BGP technology can benefit from increased sales volume by modifying their sales to allow for payments via credit card. However, to reduce the associated risks it may be wise for the Company to perform credit checks before giving the customer permission to proceed with purchases (Lore & Borodovsky, 2000).
The procedure of allowing purchases using credit cards is also likely to increase the risks to which the Company exposes its clients. This case arises where the Company customer records are accessible via the internet thus making them prone to theft and identity theft. To avoid such risks and the possible litigation the Company would benefit from using the services of a third party to handle the credit card transactions and the related data (Straub, Goodman & Baskerville, 2009). Despite the possibility of increased sales through the internet consideration must be given to reduction or avoidance of the risks that are associated with this mode of business. Thus it becomes prudent to avoid the processing and handling of sensitive financial data and allow this function t to be handled by financial institutions (Straub, Goodman & Baskerville, 2009).
Still, on the issue of risk avoidance with relation to customers, the Company may also be prone to risks associated with filing for bankruptcy. In this case, upon completion of a background check, it is advisable to avoid doing business with clients whose records indicate prior filing for bankruptcy. Also that any clients with records that indicate a poor credit history should also be avoided (Varma, 2008). In addition to this, the Company could decide to avoid all credit sales and involve itself only in cash transactions. This solution may result in a significant reduction in sales volumes and a careful assessment should be made before pursuing such alternatives (Varma, 2008). Another option worth considering when a client is faced with the possibility of filing for bankruptcy is the use of counsel to assist in negotiation (Stuhl, 2003). Once it is apparent that a client may file for bankruptcy there are occasions when negotiations may be useful in securing payment. Such negotiations may result in special financing arrangements to settle the debt owed and thus avoid the possible loss (Stuhl, 2003).
Daily businesses are exposed to various risks such as loss of property, goods, etc. Even with the best strategies to manage risk, it is impossible to completely avoid losses associated with risk. It is for this reason that one of the most essential tools a business has at its disposal is insurance or protection (Gitman & McDaniel, 2007). However, it is not possible to insure against all types of risk and therefore a Company must combine avoidance strategies and insurance policies to provide a secure environment to do business.
For example, a Company such as BGP can make sure it can avoid losses that may occur from the damage of goods in transit when an accident occurs (Gitman & McDaniel, 2008). On the other hand, it may be difficult to get an insurance company to provide a policy that could protect against the theft of goods in transit. This suggests that despite some measure of protection being afforded by insurance the Company must have its internal controls to avoid other risks. It should be noted that through adequate internal reporting a Company can avoid the legal risk of total loss in the event the insurer declines to make payment. In the absence of adequate internal controls, an insurer can build an assumption that the Company is taking advantage of the protection. The only proof that the Company can provide to contradict this is an internal control system and the associated reports.
References
Gitman, L. J., & McDaniel, C. (2007). The Future of Business: The Essentials. Mason, OH: Thomson Higher Education.
Lore, M., & Borodovsky, L. (2000). The Professional’s Handbook of Financial Risk Management. Oxford: Butterworth – Heinemann.
Straub, D. W., Goodman, S. E., & Baskerville, R. (2008). Information Security: Polices. Processes and Practices. New York: M. E. Sharpe Inc.
Stuhl, S. A. (2003). Vault Guide to Bankruptcy Law Careers. New York: Vault Inc.
Varma, J. R. (2008). Derivatives and Risk Management. New Delhi: Tata McGraw-Hill Publishing Company Limited.