Owners of modern business organizations have to deal with various challenges and risks. The term ‘risk’ is used to imply the possibility of reporting profits that are lower than what was anticipated. In addition, the concept also indicates that the firm may suffer from losses caused by a wide range of factors (Byrd, Hickman & McPherson, 2013). The threats include increased competition and changes in the preferences of consumers with regard to a given product. According to Byrd et al. (2013), each business venture has its unique risks. However, there are common setbacks faced by almost all companies, including small and large enterprises. If not well managed, the challenges may cripple the business. The move may lead to the downfall of the venture.
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In this paper, the author will analyze four categories of risks and ways of managing them. They include property, market, employee, and customer risks. To support the measures employed in dealing with the challenges, the author will use information from scholarly sources. The four categories mentioned above are introduced in a video watched in class.
Categories of Risks and Mitigating Factors
As already indicated, there are four major clusters of threats facing contemporary business organizations. Financial management techniques and policies are some of the strategies that can be used to deal with these risks.
Risks to the property are caused by a wide range of factors. They include, among others, damage brought about by naturally occurring events, such as floods. In addition, they can result from peoples’ actions, such as robbery, vandalism, and dishonesty on the part of employees. Property risk leads to both direct and indirect losses to the investor (Dunning, 2013). As a result, a business organization may be forced to terminate its operations.
Property risks can be managed using a number of financial strategies. The first step entails identifying and analyzing the possible threats that may affect the assets held by a business (Dunning, 2013). Understanding the probable dangers enhances the protection, stability, and growth of the organization. The owners of the business can seek the services of technical experts, such as financial managers, to deal with the problems. The experts come up with well-developed financial programs aimed at protecting the assets during and after losses. Business owners should work with these experts when carrying out surveys of sites and natural catastrophes.
Market risks consist of probable losses resulting from a shift in the prices of a product. The change is caused by such aspects as increased competition. The issues range from equity, interest, currency, and commodity risks. According to Henisz and Zelner (2010), this form of challenge can affect any business that has been relevant and highly competitive in the corporate world.
Business owners and financial managers can manage market risks in various ways. One measure is to respond to the emerging competition. The company should understand the needs of its customers early enough. Consequently, the financial managers will help the organization gain a competitive edge over rivals in the market (Henisz & Zelner, 2010). In addition, financial managers should be familiar with the strengths and weaknesses of their rivals. The move helps firms to understand market trends and competitors. In addition, financial experts should develop unique selling propositions for the firm.
as little as 3 hours
In today’s competitive business world, maintaining a strong customer base is the key to an organization’s success (Byrd et al., 2013). Failure to take into consideration the needs of the consumers may lead to losses and decline of the business. Financial managers and company owners can apply various measures to counter customer’s risks (Emde, 2014). The tastes of consumers change regularly. As a result, businesses should identify and analyze the products that are in high demand in the market. In addition, businesses should come up with products that retain existing consumers and attract new ones (Emde, 2014). Financial experts can also counter customer’s risks by assessing what competitors are offering. The process entails evaluating the prices, quality, and experience associated with the competing product.
Employees are vital assets to all companies. In today’s corporate world, the daily activities of both employees and leaders affect the values of the organization (Byrd et al., 2013). Some employees may violate the policies put in place by business owners. As a result, trust and motivation among stakeholders are hampered. The elements results in risks, which negatively affect the operations of the organization.
Business and financial managers can use various techniques to deal with employee’s risks. One strategy entails managing the threat at the board level (DeLoach, 2014). Such a move can be taken from a solitary point of liability. Incidents in the workplace may impact negatively or positively on the reputation of the firm (DeLoach, 2014). Administrators should take responsibility over the risks of their employees. In addition, they should identity and deal with issues affecting members of staff.
Every business faces challenges. The process of mitigating the impacts of some of these risks is expensive to the firm. According to Dunning (2013), it is not possible to eliminate all threats facing a business entity. However, financial managers should do their best to deal with all probable challenges. The move is the first step towards risk management.
Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance. San Diego, CA: Bridgepoint Education.
DeLoach, J. (2014). A formula for success: Integrating risk with strategy setting and performance management. NACD Directorship, 40(6), 90.
Dunning, M. (2013). Risk management style keeps everyone working together. Business Insurance, 47(8), 32.
Emde, E. (2014). Is your customer base at risk?: Protecting your existing business in tough times. American Salesman, 59(11), 24-26.
Henisz, W., & Zelner, B. (2010). The hidden risks in emerging markets. Harvard Business Review, 88(4), 88-95.