Nowadays, any business is associated with risks and obstacles, that’s why different ways to reduce risks in business planning are vital for developing strategies.
Internal mechanisms must be developed and applied to neutralize all possible risks that may accompany activities of every efficiently operating enterprise. All ways to minimize risks, depending on the subject of exposure, are divided into the following types:
Physical: they protect the enterprise from material impact: for example, theft of information, deliberate damage to equipment, etc. For this, tools such as installing alarms, using safes and protective cabinets, installing programs to protect information, using the services of security firms are used.
Economic: they are needed to protect a legal entity from the possibility of receiving a loss related to the activity. All of them are manifested in the process of forecasting the maximum possible level of costs, assessing the greatest amount of damage from the use of a new type of activity, as well as using all possible financial mechanisms to prevent the emergence of a threat or eliminate its consequences.
How to Avoid Risks
Correct risk assessment in business planning makes it possible to avoid the threat of damage. For this, all possible measures or mechanisms are used to prevent the occurrence of a specific risk. The main ones are:
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complete rejection of activities that carry very high risks. This method greatly limits the promising areas of the enterprise and, accordingly, reduces the amount of possible income;
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limiting the excessive use of loans and borrowed funds. The use of this method makes it possible to increase the financial stability of the enterprise, but at the same time it does not make it possible to increase the amount of profit by injecting additional working capital;
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decrease in the share of low liquid assets in the total volume of current assets. This contributes to maintaining a high level of the company’s solvency for a certain period. However, it does not allow a legal entity to increase its additional income by selling goods or services purchased with credit funds;
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preventing the placement of free funds in various financial instruments for a short period. It completely reduces the interest rate and deposit risk, but at the same time, there is a risk of lost profits and a decrease in the value of monetary resources.
