Risks in Everyday Business Life
Entrepreneurial risks cannot be avoided because the influence of business policy decisions cannot be predicted for the future. Risks that endanger the solvency of a company occur everywhere. These include environmental risks, strategic and financial risks, personnel risks or IT risks.
In order to reduce the dangers and not to have to stop ongoing projects due to a risk, it is necessary to install a functioning risk management system within the company. Risk management has the task of making risks more transparent. Risk controlling is intended to manage risks in order to keep the risk of insolvency as low as possible.
Risk management has the character of a management task. It is used wherever risks can occur. For example, in order to avoid a fire in the workshop or the offices, suitable safety measures must be taken. If a shortage of skilled workers is to be prevented, risk management must include recruitment measures that take effect in good time. It is important to arm oneself against cybercrime and legal changes - e.g. Brexit. On the other hand, product and new developments entail greater risks. Materials must be carefully examined and tested for their later use. The product must function perfectly for the end customer and also have a certain durability. In the food industry, there are many other risks in this regard, which can influence hygiene standards and more.
In order to point out the risks of a company and to be able to take countermeasures in time, all information is collected in a risk management file. The entrepreneur receives valuable support if he uses a suitable risk management software for this purpose.
Provisions for Risk Management
In the mid-1990s, German legislation became aware of the need to draft legal provisions to support the economy and protect companies.
In May 1998, the "KonTraG" was passed, a legal basis that is intended to control control and transparency in the corporate sector. The "KonTraG" had the task of improving corporate governance in German companies. It is an article law that was intended to supplement the already existing regulations of commercial and corporate law. The regulations on risk minimization for companies were firmly anchored in the German Commercial Code and the German Stock Corporation Act, among others.
The liability of management and supervisory boards was extended by the "KonTraG" as well as that of auditors. This was intended to persuade a company management to introduce systems in their own company that would alert them to imminent risks in good time. The shareholders - e.g. the shareholders of an AG - should also be protected by the law. Therefore, the top management must ensure that information on existing risks is provided in the management report of the annual financial statements. The standards established with the adoption of the "KonTraG" are still valid today.
With the support of risk management software, companies should be given the opportunity to better assess risks that may occur in all business areas. A special risk analysis software is used for the analysis of individual risks.
Risk Management software in the company
The risk analysis identifies and evaluates the risks. A risk analysis software provides professional help. The software makes it possible to classify the risks according to type and scope. It shows suitable measures for prevention. Thereby risks can be avoided or reduced. The software used in the risk analysis provides results to increase communication for a better risk perception.
A risk analysis can be considered in the planning of projects. In order to identify financial risks, the use of risk analysis in financial and investment accounting is advantageous. Also in the context of shareholder value, the software creates a basis for evaluating the company.
Risk management also means risk aggregation. All risks are summarized in this area. By determining the overall risk, the extent of risk can be expressed for the entire company. The individual risks are of particular importance. Once they have been identified and assessed by the company's management using the risk management software, they are listed in a planned income statement. In this way, risk management can be integrated into the company's overall planning. The top management benefits from a well-founded assessment of the risks and can rely on a certain reliability when planning for the future. They are also made aware of their equity and liquidity requirements.
Risk Management
All risk management measures result in risk management. It is important for the company's top management to use the information gained from analysis and risk aggregation to take appropriate measures to counteract risks in good time. The actions must not only be planned correctly, but also implemented successfully. In detail, the following sequence must be observed:
First and foremost, the company should avoid risks. Once the causes of a risk have been identified, they must be eliminated. If this is not possible, the risk must be reduced. The resulting damage is limited. Where feasible and necessary, the responsibility for the risk is transferred to a third party. For example, the financial risk of an accident can be transferred to an insurance company. If the risk consists in an interruption of the supply chain, an upstream supplier can also be held responsible.
Based on the work of risk analysis software, the company can also create the necessary conditions for organized risk monitoring. The main point here is to avoid risks by reducing risk factors. If this is not successful, the risk can be passed on to others.
However, a functioning risk monitoring also takes precautions in case risks cannot be avoided or passed on to others. The risk management file must therefore contain a statement on risk financing. This consists of taking out suitable insurance policies and forming provisions.
Support Risk Management
In order to meet the manifold tasks of risk management, the entrepreneur is dependent on professional support. The best support is provided by risk management software or risk analysis software. Not only start-ups and small companies, but especially larger enterprises benefit from software that identifies and analyzes risks and proposes and implements suitable countermeasures.
The software supports the top management in risk analysis. The programs contribute to compliance with legal requirements and provide a consistent follow-up of measures. Risk management software makes a good contribution to help the company identify and evaluate risks. It is equally indispensable when it comes to risk management or risk monitoring.
Sources
wirtschaftslexikon.gabler.de - Risikomanagement
en.wikipedia.org - Risk Management
de.wikipedia.org - Risikoaggregation