May 28, 2022

SB-Accounting

Accounting + Finance Blog

WHY YOU SHOULD ASSESS THE FINANCE RISK OF YOUR BUSINESS

Shares

WHY YOU SHOULD ASSESS THE FINANCE RISK OF YOUR BUSINESS

All businesses face risk. To be sincere, your business must face a risk for it to succeed. However, the fear of taking risks has made many business-minded people not start a business.

Nevertheless, we all face risks in life. Every day, we walk on the road without realizing that we are taking a risk. We make choices every time without knowing that there is risk involved in it. So, the risk is part of our life.

Therefore, for your business to succeed you need to take risks. What then is risk and why should you assess the financial risk of your business?

Risk is the probability that a particular event or condition may or may not occur. We can look at risk as something that may occur or may not occur. There is a saying that there are two sides to a coin. The head and the tail. If you through a coin up, you have two occurrences. That is if it is the head that will show up or the tail.

Also, when driving a car, you have two occurrences. Whether you will reach your destination safely or an accident may occur. However, when driving, the risk is based on conditions.

Finance risk, on the other hand, is the risk that your investment will lose. You may have invested your money in a new business or shares or may have lent someone your money. Asking about if the business will make a profit or loss is a financial risk. In the case of buying shares, the failure of the company not to pay you dividends is also a financial risk and for money lent out, failure to pay back the principal and the interest is also a financial risk.

READ ON  WHY IT IS IMPORTANCE TO UNDERSTAND BUSINESS ENVIRONMENT

Accessing the Finance risk of a Business

There are top reasons why you should assess the financial risk of your business. These are:
To avoid wastage of funds. If you invest your money in a business you know little or nothing about it’s a risk, you will end up wasting funds that should be used for other purposes.

To know how to deal with it. If you know about the risk you will face in a business, you will know how to deal with them. There s a  saying that a challenge you know of is half solved. Yes, when you know about your financial risk, such risk is half solved and you will know how to handle it.

To know which insurance policy you will undertake to reduce the risk. Insurance companies Can help you reduce risk by compensation. If the risk occurs, the insurance company will pay all or part of the fund involved in the risk thereby reducing the risk.

READ ON  ONE WORD FOR ALL NYSC DISCHARGE CORP MEMBERS

Plan for the occurrence of the risk. The word planning is very important to any business. Planning on how to manage a risk when it occurs is another reason why you should access your financial risk. Planning involves writing down the risk and the ways you plan to manage them when they occur. The ways and methods you plan to arrest the risk are called strategies.

Shares