BUSINESS

RISK
…and how to manage it
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 BUSINESS RISK
~ refers to a THREAT to the company’s ability to achieve its financial goals.

~ risk means that a company’s or an organization’s plans may not turn out as originally
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planned or that it may not meet its target or achieve its goals.
 BUSINESS RISKS

~ It is the exposure a company or organization to factor(s) that will

lower its profits or lead it to fail.

~Anything that threatens a company's ability to achieve its financial

goals is considered a business risk.
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 Understanding
Business Risk

01 > When a company experiences a high

degree of business risk, it may impair its
ability to provide investors and stakeholders
with adequate returns.
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 Understanding
Business Risk

01 > Business risk is influenced by a number of

different factors including:

a. Consumer preferences, demand, and

sales volumes
b. Per-unit price and input costs
c. Competition
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d. The overall economic climate

e. Government regulations
 Understanding Business Risk

~ successful businessmen & decision- ~ accepting risks exist is a starting

makers make sure that the risks point for the other actions, but the
resulting from their decisions are most important is to CREATE THE
>MEASURED RIGHT CLIMATE FOR RISK
>UNDERSTOOD MANAGEMENT.
>and ELIMINATED
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 02 Types of
Business Risk
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 Economic
Risk
~ Economic conditions fluctuate depending
on politics, the market, and foreign
countries.

~A well-prepared risk company needs

to monitor economic patterns and
prepare for any downturns.
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 Economic
Risk
~ Managing this risk requires an
organization to save money and
optimize cash flow
management.
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 Compliance
Risk
~ All industries have tax laws and
regulations to comply with. The
larger the enterprise the more
complex these regulations become.

~ when businesses don't implement a

strong business strategy to prepare
for compliance risk, disruptions can
ruin their reputations and cause them
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to close permanently.
 Compliance
Risk
~ For example, timekeeping
software ensures the HR
department doesn't underpay
employees or allow them to work
too many hours.
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 Competition
Risk
A competition risk can happen
when a business's competitor
takes an increasing share of a
business's market for a product or
service.
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 Competition
Risk
It's sometimes called a
COMFORT RISK because it can
result from a company's
executives becoming so
comfortable with a company's
performance that they fail to make
continual improvements with the
company's products or services.
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 Operational
Risk
~ Operational risk can also occur
when natural disasters or other
power cuts impact internal
operations.

~ occurs when a business's day-to-

day activities was threaten to
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decrease a business's profits.

 Operational
Risk
~ Employee errors: A business can
experience a threat to its operations
if employees make significant
mistakes at work.

~ Damage to assets: A natural

disaster can damage a company's
physical assets, which is an
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operational risk.
 Financial
Risk
~ occur when a company doesn't
perform debt management or
financial planning tasks. Market
changes or losses can threaten a
company's financial standing.
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 Types of Financial
Risk
~ CURRENCY RISK: A business
can experience currency risks in
international business dealings
because a foreign currency's
value can depreciate
unexpectedly.
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 Types of Financial
Risk

~ DEFAULT RISK: Taking out a

business loan with greater interest
than a company can afford can
put a company at risk of
defaulting, or not paying, the loan.
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 Types of Financial
Risk

~ Liquidity risk: A company faces

a liquidity risk when it can't quickly
convert its assets into cash.
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 How to identify Business Risk?
1. ANALYZE BUSINESS PROCESSES.
Performing the SWOT Analysis:

STRENGTHS: Identifying a company's strengths can help you learn what the company is doing well.
You can also expand on strengths to protect against business risks.

WEAKNESSES: When you identify a company's weaknesses, you can develop strategies for
strengthening the company in those areas.

OPPORTUNITIES: You can perform market research to learn about a company's potential for growth
or other opportunities to improve.

THREATS: You can review internal and external factors that can threaten a business's bottom line, or
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its risks
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 How to identify Business Risk?
2. SURVEY FOR RISKS AT EVERY LEVEL.

After you analyze a business's workflows and processes, you can look for risks
at every level of a business. Anonymously surveying employees from
management to entry-level staff can help you identify threats to each area of a
business.
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 Identify common risks
in the industry

Looking for common risks for

similar businesses can give ideas for
policies and processes that reduce
these risks.
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 Record Risk

CREATE A RECORD for each risk

for a business to learn about
recurring threats to the business's
reputation or profits.
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 KEYPOINTS TO
REMEMBER
IN UNDERSTANDING BUSINESS RISK
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 Keypoints to remember
~ Organizations should monitor and
prepare for ECONOMIC DOWNTURNS
to avoid financial ruin. They should
save money, optimize project
management, and identify economic
factors that lead to disruption.
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~ Non-compliance and securities fraud
are two different types of risk that
impact an organization the most. Non-
compliance costs an organization
thousands of pesos a year and can
cause a ruined reputation. It's critical
to put safeguards in place to prevent
hacks and non-compliance.
 Keypoints to remember
~ To mitigate financial risk, businesses
should budget each business
process carefully and diversify their
client base.
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~ Business owners should not
become too comfortable when their
organizations are established. It's
critical to MONITOR TRENDS and
create a risk management strategy to
avoid a competitive takeover.
 RESOURCE
CORPORATE GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND INTERNAL
CONTROL CABRERA, MA. ELENITA; CABRERA, GILBERT ANTHONY; CABRERA,
BERNADETTE 2021
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 Thank you!
Do you have any questions?
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