What is Risk Management and How Can it Help Save Money?
August 6, 2019
When it comes to finances, owning and operating a company, hiring employees and other aspects of doing business, every business owner takes some form of risk. To manage these risks and ensure that the impact of a negative outcome doesn't cause your business to go under, many business owners procure risk management services such as those offered by Consolidated Personnel Services. Read on to learn more about risk management and its many benefits:
What is Risk Management?
A risk management service identifies potential risks ahead of time and analyzes each risk as well as offering business owner's methods to reduce or avoid these risks should they arise. Common financial risks experienced by business include bankruptcy, recession, volatility in capital markets and inflation. All business owners practice some form of risk management, whether they realize they are doing so or not. After all, simply going into business and owning an operating a company isn't for the faint of heart. Thankfully risk management can help you reduce your risk and increase your chances of success as a business owner. Many business owners have recognized these benefits of risk management services as mentioned above and have sought out such services.
Benefits of Risk Management How Such a Service Can Save You Money/ The Role of Risk Management
Identifies The Risk
One important role of risk management is to identify the risks your business might experience. One role risk management provides is identifying the potential risks you might face in your particular business. There are four primary types of risks that your business could experience, and they are as follows:
- Operational Risks: This includes business continuity practices, client and business practices, employment practices, external fraud, internal fraud.
- Credit Risk: This is a risk that occurs when a debt that is owed to a company isn't paid.
- Market Risk: This occurs when an asset that is valued at a certain amount decreases in value due to commodity prices, foreign exchange rates or interest rates.
- Reputation Risks: The risk of damage occurring to your business's reputation due to external and internal factors.
Equates to Fewer Claims
Risk management when effective will save businesses money. One way in which it does this is helping businesses experience fewer claims. Risk management services will work to prevent workplace injuries from occurring. After all, no employer wants to see their employees injured. In addition, a workplace injury will often result in a worker's compensation claims being filed. Therefore, risk management will attempt to prevent these types of accidents from occurring in the first place, reducing the number of filed claims and eventually reducing the cost of premiums related to such cases.
Safety procedures that are implemented by risk management services will make methods of production more efficient, eventually, increase productivity and eventually profits.
Another way to achieve real savings through risk management is through lower insurance premiums. When a business is considered high risk by an insurance company, their premium goes up. It only makes sense, the greater the risk of an injury, the more insurance companies charge in order to cover the eventual payout they foresee having to make. In essence, the greater your businesses exposure, the more expensive your premiums. Risk management works to reduce this exposure, and subsequently, save your business money by a reduction in premiums.
Predicts Emergencies And Prepares Ahead of Time For Them
Risk management foresees potential emergencies and circumstances. This allows your business to bounce right back from unforeseen circumstances and emergencies better than ever before. It allows you to weather the storms of your industry.
Can Make it Easier to Borrow
Because your risk management service will ensure your business is financially prepared for the worst and has a plan in place for your financial future, your business is seen as a good risk to lenders. This means in many cases, lenders will be more willing to extend loans or increase your credit limits because you have a risk management plan in place.
Improves Brand Recognition For The Betterment of the Company
If your company stays committed to risk management, it sends a positive message, improving your reputation and brand awareness. Employees feel confident working for you as they know you are a responsible business owner. Having a risk management plan in place proves your business holds itself to a high standard and is reliable.
Provides an Abundance of Valuable Information
When a risk management company assesses your company, there is a great deal of effort placed in acquiring information. This information can be used again and again and shared throughout the company. This means you don't have to start from scratch if a situation comes up you need to handle. Thanks to the risk assessment information/plan, you will know the right steps to take for your business to come out ahead.
Makes The Act of Doing Business Less Risky
In general, every business owner takes a risk when becoming an owner/operator of a money-making endeavor. This is true no matter how large or small your business happens to be. When you hire employees to work for you, the risk goes up even more. Thankfully, through services like Consolidated Personnel Services, the risks you have to face in order to do business on a daily basis is reduced and you are given a greater chance at success as a business owner. Contact us today to learn more about how risk management works. Of course, other than taxes and death, nothing is guaranteed. However, through services like this, you will give your business the best chance of success possible.
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