Risk management

Businesses increasingly find themselves in a complex world with complex issues and risks. These risks range from digitalization challenges to economics, competition and more.

That's why risk management has never been more important if companies want to maintain overview and control over the risks that continuously affect their business.

Classic risk management is a process where companies assess and address the risks they face - now or in the near future.

In other words, good risk management is about getting an overview of potential risks, both internal and external, and having an action plan on how to manage, treat or deal with them.

Why is risk management important?

For all businesses, it's about avoiding the risks that could affect them - and if they do, having an action plan for what you do, how you do it and who does it.

Companies increasingly face the risk of losing revenue, customers, market share or employees in an increasingly complex world where threats such as artificial intelligence, digitization, increased climate requirements, and increased demands from customers and regulators play a role.

If a company fails to get an overview of possible internal and external risks and know how to respond to them, the worst-case scenario is that the company may not survive the threats that could hit them.

That's why it's important for companies to constantly work with risk management.

What risks can affect a business?

Running a business has probably never been more complex than it is today, and businesses are increasingly facing threats both internally and externally from a wide range of areas.

Many companies experience, among other things:

• Requirements for digitization
• Environmental requirements
• New product requirements
• Demand for new markets
• Decreasing demand
• Decreasing supply of raw materials
• Rising commodity prices

And many more.

Financial risk management

The concept of risk management is also relevant in the finance department, where risk management is used in connection with the company's credit policy.

A risk policy ensures that you have a qualified overview of your risk and an action plan on how to manage it.

Risk management can, for example, be about managing current and future credits, credit periods and credit maximums.

Risk management models

There are a wide range of risk management models - some more advanced than others.

A basic risk management model could look like this:

1. Identifying risks
2. Assessing risks
3. Managing risks
4. Reporting of risks

There are also many models that divide risks into internal and external risks, but basically, it can be argued that all risks can be addressed based on the above four points - regardless of the nature and extent of the risk.

If you need a model for your specific area, you can search for one - there are many different models, including financial risk management.