Risk Advisory: Safeguarding an organization’s success
There’s no such thing as a 100% risk-free business environment, but it is possible for businesses to manage these risks as well as mitigate the effects of risks that were realized. Our team helps to identify and manage risk to enable a business to provide better value for clients and stakeholders, and to ensure its profitability.
To be able to provide effective risk management services, an advisory team must:
- Get to know the business inside and out within the context of its industry
- Determine which present and potential risks take precedence
- Monitor developments which affect the gravity of risks
Because risk is always present, Risk Advisors must also formulate strategies that are comprehensive and able to analyze and manage new risks as they present themselves. They must be able to use the latest risk management technology and leverage industry-specific knowledge to help business leaders make informed risk-related decisions.
Risk Advisory strategies also involve corporate governance and compliance, as businesses run the risk of heavy penalties when their operations aren’t aligned with industry standards and regulations. This is why Risk Advisory is closely related to Internal Audit, during which “audit risks” are identified.
Types of risk.
There’s no shortage of risks faced by a business of any size, which may be broadly defined as anything that may cause a serious loss of capital or business failure. These include cash flow or supply chain disruptions, declining demand, increasing production costs, outdated production technology or equipment, natural disasters, and political upheaval.
On top of the requisite accounting and Risk Advisory proficiency, other types of risk require specialized expertise to identify and manage, such as:
- Compliance Risk
- Country-specific Risk
- Cyber Risk
- Forex Risk
- Operational Risk
- Regulatory Risk
- Reputational Risk
- Strategic Risk
- Systematic Risk
Understand to manage.
In calculating the amount of risk, the Risk Advisory team considers operation leverage, financial leverage, and total leverage effect ratios, as well as the ratio for contribution margin. Depending on the level of complexity, advisors may also use calculation techniques used for statistics.
Many factors affect the amount of risk taken on by a business, which includes government regulations, market conditions and competition within the industry, changing consumer preferences. Businesses with a high amount of risk must plan their finances accordingly so as not to allow their debts to become unmanageable.