A Risk Management Program for a Corporation

Businesses are always exposed to risks of several kinds, for which risk management becomes mandatory. To keep the corporation safe, an appropriate risk management program is obligatory even in times of uncertainty. Risk management helps in strengthening communication between the higher authorities and low line workers. The reports and analysis would be shared vertically and horizontally so that risk mitigation becomes easier through a smooth communication flow. It is conducive to a healthy organizational culture where trust is boosted and positivity is encouraged. In the absence of this program, the business would be unable to define its objectives or even meet its goals. This paper aims at designing a risk management program in which traditional and financial enterprise risk management would be covered. Further sections of the paper would discuss how those identified risks affect the organizational goals to get a clear picture of the business's existence and prosperity in the market.
A minimum of ten risks, both including traditional and financial risks, are as follows:
i. Since the strike of pandemic worldwide, there has been a constant risk of economic slowdown with slow profits and recovery (The One Brief, n.a.). There is a risk of reduced earnings as the businesses might not be progressing at the rate they were doing before.
ii. Project risks due to the slowdown of the economy, the project costs, or its schedule. The projects might be behind the projected timeline, and the expected deadlines are not met.
iii. Damage to the company's reputation in the market if a product fails due to economic slowdown or projections of the project. The company's image can also be affected by a privacy breach or any misconduct committed by the well-known company's management person.
iv. Market and trade risks are always present in the industry since competition always exists. Even if it is about the product pricing of two products offered by two different companies, the market, and trade risks would be there. Moreover, certain unanticipated risks cannot be predicted by market changes such as a sudden change in technology. It can eventually lead to financial risks for the corporation as well.
v. Political unrest such as a sudden change in the government can cause risk for the businesses and a change in laws and policies that directly affect the commercial practices.
vi. Cyber-attack is one of the most emerging and significant traditional forms of risk faced today. Breach of privacy, stealing important data, including customer's information by the cyber attackers, is one of the most talked-about risks of modern times.
vii. Human-made risks such as civil unrest, terrorism, or natural hazards are also some of the calamities that pose threats to businesses' normal workings on a global level.
viii. Credit risk is one of the most common forms of financial risk associated with borrowing money. In investment terms, if the borrower is unable to repay the loan, then he would become a defaulter, and the company or the investor can bear huge losses (Chen, 2020).
ix. Liquidity risk is another form of financial risk on which the company or the investor becomes unable to meet his short-term debt compulsions.
x. Operational risks are always involved in a business, and they also a form of financial risk. It can be due to poor management practices or faulty financial rationality. If the company or the investor is unable to succeed in what it has promised, then financial losses are inevitable.
Addressing These Risks with Meeting the Organizational Goals
Organizational goal of "survival" and identified risks
Addressing the risk of economic slowdown would help in the business's survival by strengthening its sustainability through tough times. It can involve marketing the business to the customers in an effective way so that it implants a mark in their minds, broadening of the customer base and attracting the new ones, boosting the morale of the employees so that they work with engagement to keep the business running successfully and bringing in innovation in the business practices (Queensland Government, n.a.). Networking can be a useful strategy to cope with economic slowdown since it would help the corporation know what other peers are doing to deal with the situation. Some more ways to minimize this risk would entail running assessments for improving the company's existing procedures, conducting evaluations on the employees for upgrading their skills and rectifying any mistakes, and finding new opportunities for the staff, suppliers, and other related business partners to keep them going.
Addressing the risk of project vulnerability can be handled by keeping a close eye on the technological advancements in the market and innovation. The projects, especially those related to product development, are highly dependent on technology, which has a high risk of changing each day (Kaplan & Mikes, 2012). Keeping updated information would help the organization deal with project risk and help in effortless survival.
The intangible assets, like the company's reputation, should be saved as it soon becomes a risk in uncertain or turbulent markets. A company with a durable repute would come out of the turmoil in such a market since it would easily attract new customers. The employees would be motivated enough to keep the company running with energy (Eccles, Newquist & Schatz, 2007). Such a company would be in the position of earning stable profits, and future growth would be guaranteed so that its survival is safeguarded in times of risk.
Market risks could be mitigated through diversification if the company knows the survival trick. Through diversification, a range of products and services could be introduced into the market so that if one product fails to impress the customers, the other might help the company earn some profits. It would be good assistance for the company to cope with market fluctuations and downturns so that business survival does not remain a problem anymore.
Political instability can pose a direct threat to the corporation. When trust is not established between the government and the firms, there are fewer chances that the business would thrive. As the government has the authority to change policies and laws that might undermine a product or expose the company to cyber-attack, the firm would be in no more position to strive for survival (Drzik, 2016). Hence, to address the risk of political unrest, the organizational goal of business revival needs special attention so that the business owns sufficient resources and expertise for long-term sustainability.
Cyber-attacks are the most common form of risks businesses face today since every technological appliance is used by the internet and is even synchronized. There always remains a threat of breaching private information, especially if a business like banking deals with tons of customer data whose credit card numbers and ID card details could be leaked. It would deeply hurt the reputation of the company; such risks hit the firm. Businesses can only survive if they train their employees for this defense and use software extremely protected against cyber-attack (Cook, 2017). Creating backup is always a mandatory action in this regard too.
Human-made risks such as civil unrest and terrorism are uncertain times that bring risks for the businesses differently. During the times of terrorism, the normal business processes, dealings, and consumptions patterns of the consumers change that affect the business profits directly (Gold, n.a.). Survival becomes tough when the demand is less, production is slow, less investment, and other multiplier effects are observed. Similarly, in times of civil unrest, the companies would have to later their strategies so that their survival is ensured, such as daily business operations would be specified, and the available resources would be scrutinized to cut costs and maximize profits (Laker & Roulet, 2019). Surviving natural hazards for small businesses is difficult. Still, the already established companies can survive by having the property insured, understanding the protection limits and restrictions, and developing an emergency response plan beforehand so that employees and authorities know what to do in such critical times.
Credit risks could be minimized for business survival by keeping an eye on the creditor's ability to repay the loan. For example, US Paycheck Protection Program had to let go of 4.5 million loans and forgave them for small businesses since the financial positions became tight as soon as Covid-19 struck on a global scale (Koulouridi et al., 2020). Priorities need to be set so that the business or the investor knows who can repay when such uncertain times hit. The alignment of the policy environment needs to be done to survive a credit risk.
Managing the liquidity risk means that a company is in a strong position to meet its obligations and can be profitable by avoiding financial troubles (Effiong & Enya, 2020). To survive this risk, the corporation must be on the lookout for its short-term cash and be equipped with a strong management approach. The liabilities to suppliers should not be in the pipeline, so the business should keep paying off its debts and maintain its credibility in the market.
Operational risk is also another form of financial risk, which is built up by the human. It can be due to poor management, weak decision-making, low management of the employees, etc. It varies from one industry to another; hence, it has to be managed by the specialist carefully. For the business to achieve its goal of survival, the company must have a strong business to business relations, must be vigilant whether its production side is throng and all the equipment are in working condition, and must be updated with the regulations so that mistakes could be avoided for reducing operational risk.
Organizational goal of "profitability and growth" and identified risks
Addressing the risk of economic slowdown with meeting the organizational goal of profitability and growth is challenging. Small businesses are usually affected quite rapidly by economic slowdown since government support is low, and equity markets are not as strong as expected. Large businesses can handle this risk as they have long-established relations with strong governmental bodies that can assist them in perplexing times and their networks are strong for helping them survive.
Project risks could be mitigated for business profitability and growth by setting achievable deadlines for the projects. Particularly, when the projects are for the other stakeholders and business networks whose success depends on the success of the projects, the company's own reputation is at stake. Thus, realistic expectations for the projects would help in reducing this risk for growth and sustainability.
Creating a brand or company image takes years to be persistent, and if one product of the company fails, the firm's image is badly hurt. Surviving cut-throat competition would be impossible as customers would no longer be loyal, and the real significance in the market would be lost (Akhtar, Xicang & Iqbal, 2017). To have profitability and growth, the businesses should cultivate management policies and operational procedures for enhancing the image by cost-cutting.
Market risks arise when the fluctuations in the market process are witnessed that directly affect the business. For reducing the risk of losses and slow growth, the business must be apprehensive of the market risk and stay informed about the inflation rates, rates of interest, share prices and prices of the commodities, etc. (Hui & Sarah, 2019), so that combating with the unexpected changes should not weaken the company. The net profits are impacted negatively if the market fluctuations are not favorable for the company. Hence, the corporation has to be vigilant to reduce this risk's impacts on business growth and profitability.
Political instability affects businesses, and its intensity is mainly based on business size and type. Large companies can deal with political unrest by keeping the operations running to cater to the customers' growing needs. However, this strategy might not stand true for small businesses that cater to the low-earning market category. These small firms would be instantly affected by political unrest and would not be strongly supported by the government. Large businesses have a strong network along the governmental authority's lines and can get back on track in very little time.
Cybersecurity is of great concern from both small to large corporations these days. This concern is amplified as technology has become the heart of business operations. Substantial financial losses due to cyber-attacks can negatively impact business profitability and growth. To reduce this risk, the corporation's information, including the financial data, is obligatory. MSSP, a Managed Security Services Provider, is used by businesses to detect the threat of cyber invasion and launch a quick investigation and response process for dealing with this risk (Barillon & Robles, 2020).
Investment is slowed down in times of civil unrest and terrorism. The incoming of the required financial resources for the business's long-run profitability and growth becomes extremely challenging, and mitigating this risk becomes a priority for both small and large, businesses. For handling the implications of this risk on the business, the firm should have a preparedness plan by including protecting the employees, catering to the fortification of the facilities, resuming the operations with limited costs, necessary adjustments, and maximized net profits (Robbie, 2020).
Credit risk can be handled when the firm's ability to pay back is strong. If financial resources are available, the firm would be able to earn its reputation in the market by paying back the loans. Research has proved a positive relationship between credit risk management and business profitability (Sun & Chang, 2018). Higher the efficiency in credit risk management, higher the chances of business profitability and growth. Therefore, higher business profitability and growth can be achieved by paying attention to management and control over the finances and regularly keeping track of the balance sheet.
Studies have indicated that liquidity risk and profitability are inversely related, which means that if liquidity risk is high, profitability is low and vice versa (Saleh, Abu Afifa & Murray, 2020). Conversely, the higher risks are related to higher profits and thus are directly proportional. It is suggested that businesses earn high profitability and maintain growth when the firm's return on the investment is greater than its costs. The firm must explore its short term assets and short term liabilities so that whenever it feels it is going on the wrong track, it can quickly amend its actions and set things right.
Operating costs have a direct adverse effect on the firm's profitability and capital structure, especially for financial businesses. To prevent this risk, the business can conduct frequent risk-control self-assessment, stay updated with the regulation, scrutinize any misleading acts of the employees that can result in financial crimes, detect weaknesses early within the management practices, etc. (Eceiza et al., 2020). For achieving the organizational goal of business profitability and growth, the mitigation of this risk is essential for long term sustainability.
Conclusion
Risk management is the savior plan for any organization, either small or large. Managers and employees should prepare such a plan as soon as they enter the business since it prevents the business from bearing losses and makes their jobs safer. Strategies could be devised promptly so that injury trends and hurtful losses could be avoided from reoccurring. The potential risk identification would help the projects be completed on time as expected; the deadlines would be met, particularly for the construction companies whose projects are for other renowned companies.
Their profits are largely dependent on whether the projects would be delivered on time, and for that, detection of possible risks and their eradication is important. Further, it saves time and costs once the risks are identified beforehand, leading to wise decision making. When unexpected circumstances are to be faced, there is more tension and anxiety for the employees. Therefore, it is better to stay prepared so that minimizing repetitive losses could be made possible.
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