Anticipate and protect yourself from corporate losses by implementing these financial risk management strategies. Keep reading and get to know them.
One of the main concerns of companies is being exposed to events that put their financial stability at risk, or that represent losses that in the long term lead to bankruptcy.
During 2020 we were able to observe that one of the most significant differences between companies that have managed to stay afloat and even increase their profits, despite global circumstances, is, although not exclusively, the application of innovative risk management and analysis systems.
Although it is impossible to eliminate threats completely, it is also feasible to implement financial risk management strategies that help mitigate losses, minimize uncertainty, and be prepared to act in a timely manner when experiencing an eventuality.
How does risk control help your organization?
We can distinguish different types of incidents, some possible to predict and others that arise in an unforeseen and inevitable way, even with global implications, as has been the COVID-19 crisis, so how could companies prepare to protect their finances in any case? moment?
To a large extent, the answer lies in making the most of the databases, both internal and external, that is, analyzing and evaluating the operation of each area and department of the organization, as well as the factors linked to the market, investments, or others. business assets, in order to identify possible risks but also growth opportunities.
Carrying out these management and analysis tasks supported by the use of business intelligence software can be very useful, as it has the ability to process a large volume of data in less time and more effectively than if it were done manually. , obtaining better results.
Below, learn about the types of financial risks to which your company could be vulnerable and the strategies to manage them to benefit your objectives.
Wait, What are the most common financial risks?
Knowing the types of financial risks to which your company may be exposed will make it easier for you to plan and execute timely financial risk management strategies. effective and precise.
Market risk
It is found in operations subject to financial markets, due to their constant variations. Within this category, we identify three types of risks that depend on market conditions.
- Currency risk: relates to the volatility of the exchange rate between currencies, specifically when an investment requires a currency exchange.
- Interest rate risk: This is when interest rates change, whether rising or falling, to the disadvantage of the company’s objectives and financial stability.
- Market risk: it is a consequence of the volatility of financial instrument markets, such as shares, derivatives, debts, etc.
Liquidity risk
It occurs when a company has assets, but not enough liquidity to take care of its responsibilities, for example, debts.
Credit risk
It occurs due to late payment; It can generate losses and corporate imbalance.
Operational risk
That which is the consequence of an error or deficiency in the organization’s procedures, operations, personnel, or internal systems.
4 Financial risk management strategies
We present 4 strategies that you can execute to mitigate corporate losses, anticipate incidents, be better prepared for eventualities, design intelligent solutions, and make decisions that help guarantee and increase the profitability of your organization.
Digital transformation and use of risk management tools
If you want to survive and prosper in the digital era, it is necessary to enter it, which is why many companies are investing in the application of a financial risk management system that incorporates artificial intelligence technologies, which in turn integrates advanced analytics techniques.
The digitalization of the risk management system, as well as the global automation of the organization’s operations, will provide analysis, evaluations, and reports on each aspect required, without being subject to human error, ensuring its effectiveness.
Market and investment analysis
Having vast information about the market and what you want to invest is the first step to minimizing the risk of a significant loss since in this way it will be feasible to obtain an analysis of greater precision and quality.
In this way, better mitigation plans can be executed and some changes in the market or other possible incidents can be anticipated, so it is important to consider the amount of information available to analyze since the level of risk assessed will depend on this.
Analysis and internal evaluations
In order to prevent operational risk, it is necessary that the risk analysis management system has the ability to collect, store, and centralize the databases of the entire organization on a single platform.
This will allow information to be intertwined between departments that were previously incommunicated, facilitating the detection of failures, deficiencies, or weak points within the company, which at a certain time could become high-level risks.
Scenario forecasting
Anticipating allows you to gain an advantage over the competition, as it opens the possibility of focusing your resources on preventing instead of correcting. This can be achieved once you know in detail the type and level of risk they may face.
Business Intelligence technologies provide the tools to generate scenario projections, offering the opportunity to develop multiple contingency plans, so you will be prepared even when a higher-risk incident occurs.
How does Business Intelligence (BI) help prevent financial risks?
Business intelligence software such as BI offers a wide catalog of tools, aimed at both risk management and analysis, as well as future projections, so that you can make key decisions better informed, and grow your business.
BI artificial intelligence optimizes the identification of threats and opportunities, allowing a deep analysis of the risk, its origin, consequence, and level of threat. Knowing the risk in detail is the best strategy for designing more effective mitigation plans.
In addition, BI integrates and processes a large volume of data, which it updates in real-time, and manages it through automated processes, providing more complex and intelligent analysis. This way you will know how to apply your prevention, control, and mitigation resources in a timely manner.
Implement the above financial risk management strategies accompanied by robust and effective software such as BI to guarantee the durability of your organization. Are you interested in getting started? Do it today and start enjoying the benefits of BI.
