Risk management systems: Top Risk Warning Signals

Perhaps your staff turnover is too much for you to keep up with. Are your suppliers unreliable, and your lenders unpredictable? Could your company’s data somehow be vulnerable? If this is so, then your business might be at risk. In such situation, how do you identify the risks that threaten your business? Many risks faced by business can be minimized through an implementation of an active risk management system. Risk management process has the tendency of reducing problems that was encountered during a project to as much as 90 percent.

Kinds of Risks

Risk Management Systems are planned to achieve more than identifying risk. The system must have the ability to not only quantify risk, but to make prediction of the impact of the risk on each project. The outcome might be one that is either an unacceptable or an acceptable risk. The acceptance or non-acceptance of a risk is usually dependent on the project manager’s tolerance level for risk. Every business has to face either operational or financial risks at one point. Medical and finance industries can be associated with compliance risks.Environmental risks, over which businesses can have little control, can also vary.

Risk Warning Signs

There are a number of warning signs that can indicate that a business is at risk. These include:

  • Financial position: Flat or reduced revenue, inability to pay invoices on time or to meet payroll
  • Customers: Increased number of complaints, loss of regular customers, potential leads dwindling
  • Staff: High turnover, low productivity levels, inability to fill key positions, loss of a key employee
  • Market and competitors: Increased competition, declining sales, falling market share, need to reduce prices to drive up sales
  • Management: Lack of executive commitment, ineffective decision making
  • Suppliers: Reduced reliability
  • Lenders: Reduced access to credit, poor terms offered
  • IT: Disruption to critical systems, data integrity lost, downtime, user complaints, unauthorized access, exposure to malware or hackers

Asset Liability Management (ALM) is an integral part of the financial management process of any bank. ALM is concerned with strategic balance sheet management involving risks caused by changes in the interest rates, exchange rates and the liquidity position of the bank. While managing these three risks forms the crux of Asset Liability Management, credit risk and contingency risk also form a part of the Asset Liability Management. The Indian financial markets have witnessed wide reaching changes at an unprecedented pace over the last five years. Intense competition for business on the assets and liabilities sides combined with increasing volatility in both domestic interest rates as well as foreign exchange rates is putting pressure on the management of banks and financial institutions to maintain spreads, profitability, and long-term viability.

Author’s Bio

Ahmed Yur in this piece looks at what asset liability management is all about with the challenges facing it. The author also looks at some tips regarding risk management system.