Any and every business has to face risks. Risk management is an essential part of every company’s planning and policy-making process. When it comes to risks, the management of a company can only control and manage some risks. Some risks are beyond the company’s control. Anticipating risks and assessing them correctly is an important function of management. There are many types of risks which a company may face.
1. Market Risk: this is the risk of changing conditions in any marketplace. Companies need to constantly adapt and update according to market demands. If a company is slow to react it may result in big losses. The increasing tendency of consumers to shop online is a good example. The companies have to make sure that they are able to compete online.
2. Credit Risk: This risk can affect two ways. First is the credit that a business gives to its customers. If the buyer defaults on payments then it is a loss for the company. Companies also take credit from suppliers. If the suppliers are not happy then they may supply sub-standard products. Even worse the suppliers may stop doing business with the company altogether.
3. Liquidity Risk: this includes asset liquidity and operational funding liquidity risk. Asset liquidity will assess the ability of a company to convert its assets into cash with ease if required. Operational funding liquidity is to manage the daily cash flow. There may be unforeseen circumstances which may force a company to find cash quickly and easily. It is at this time that the true asset liquidity can be found.
4. Operational Risk: risks which arise from a company’s ordinary business activities are called operational risks. These can include fraud risk, lawsuits, personnel problems, and business model related risks. Business model risks are when the company’s marketing and growth plans are not accurate and are not able to predict correctly.
No company wants to face tough times but these are unavoidable. More important is to make sure that the company is ready to face these problems in an effective and quick way. This is why risk analysis is crucial. This allows the company to be prepared and take some preventive action before any problems can become big. Bitcoin Trader is a trading platform which is completely automated. It does careful risk analysis before suggesting you the right way to invest your money. This ensures that you don’t lose any money while trading on this platform.