11 May 2020 Ankit Chadha

5 Things to Include in Your Financial Risk Management Process

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Implementing risk management techniques is essential for every organization. Effective financial risk management helps maintain stability and expand organizational growth over time. Particularly, finance departments have to deal with different risks on a daily basis. It is vital to execute financial risk management strategies to monitor, analyze, and minimize potential threats.

We, at TRC Corporate Consulting, specializing in financial risk management services and support our clients with impacting results. We believe that managing risks can help you achieve your objectives efficiently. We commit to collaborating with our clients to help them identify issues and devise value-added solutions.

With the advancement of technologies and business intelligence, financial risk management is now more accurate and needed than ever. It has become possible to avoid huge losses as financial risk management helps foresee threats prior to making any new business decisions.

With the advancement of technologies and business intelligence, financial risk management is now more accurate and needed than ever. It has become possible to avoid huge losses as financial risk management helps foresee threats prior to making any new business decisions.

Let us look at the five things you must include in your financial risk management:

  1. Identify Risks

The first step is the identification of risks that the business might be exposed to, in its operational environment. There are many risks associated with businesses, such as legal, environmental, regulatory and market risks. It is crucial to identify as many risks as possible for effective financial risk management.

 

Finance departments must have awareness sessions for the types of risks that they may likely face during the business’s life span. Including such sessions enhances the conscious identification of risks and would call an immediate assessment and responses under financial risk management. The advantage of this approach realizes the risks to minimize their impact in the future.

2. Assess Risks

The next step in financial risk management is the assessment of identified risks. The scope and intensity of the risk must be analyzed thoroughly. Some risks can bring your whole business down, while there are risks that are minor in nature and can only cause a few inconveniences. When assessing risks, the primary goal is to determine the worst-case scenario and analyze what needs to be done to recover from the potential losses if they occur.

When financial risk management includes a data-backed assessment by mapping the risks to different policies and procedures, it supports effective risk evaluations to determine the implications of each risk.

3. Evaluate/Rank the Risks

When practicing financial risk management, it is crucial to prioritize risks based on their severity. You rank the risk by determining their magnitude, which is a combination of probability and consequence. Decisions are then made about whether the risk is acceptable or whether it is severe enough to warrant treatment.

This stage in financial risk management can be included for evaluating the probability of occurrence and the resulting impact of each identified risk. Further, it can involve shortlisting of the risks that possibly have the highest impact and should be therefore managed first. 

4. Implement Strategy

Only after the evaluation of risks should implementation strategies be put in place. The team members assign and execute strategic procedures to provide further updates on the severity and impact of any specific risk. Risk mitigation policies, preventive and exigency plans are created in this step of financial risk management. Thus, you can include effective implementation with a channel for direct instructions to preventing the risk from actualizing or mitigating it all together.

  1. Monitor Progress

After the successful implementation of financial risk management strategies, it is crucial to keep a close eye on the situation to monitor any further developments that may require relative actions. Even when the risks are put to a pause, periodic reviews are mandatory to ensure that new complications do not arise. Moreover, monitoring can help identify new risks at the initial stages itself.

Risk is inseparable from any business. Every organization deals with some degree of risk, but with financial risk management, its impact can be significantly lessened. These techniques, if included in your financial risk management, protect the company’s assets and the funds. While any organization cannot wholly avoid risks, they can anticipate and mitigate risks through a reliable financial risk management process.

 

How TRC Helps with Financial Risk Management?

At TRC, we firmly believe and understand that financial risk management is not intuitive. For the same, we formulate risk management solutions that are research-based and cost-effective to allow you, as an administrator, to continually learn about the different types of financial risks that your business can face and help you set up suitable mitigation procedures for each.

TRC Corporate Consulting, with over 70+ years of consulting experience in critical advisory and financial risk management services, helps organizations throughout the comprehensive lifecycle of its financial operations. With our well-strategized governance, reporting and implementation strategies, we deliver enhanced transparency, efficacy, compliance, and financial integrity to organizations. So, if you are looking for an experience and reliable consulting partner, contact us for a detailed understanding of our services!