Advantages Risk Management
Why risk management?
Many entrepreneurs do not like to think about possible risks for their company. It is more attractive to think in terms of opportunities than in terms of threats. Yet you cannot escape it: risk management is fundamental to your long-term business results and the value of your company as a whole. Moreover, opportunities and risks are closely linked. For example, entering into a partnership can be a great opportunity, but perhaps an even greater risk. And if you do want to take this risk, the question is what measures you can take to cover yourself as much as possible. Careful consideration is important; preferably in a systematic way for all your business processes. Only then is risk management.
Risk position determines valuation and credit
Good risk management is an important criterion for the bank when granting credit. From 2008, the new Basel 2 capital accord will apply to all Dutch banks. Your company is valued on the basis of its risk position. With a high risk position, the bank will increase the interest on loans and loans. Good risk management improves your chances of a better rating, gives you a better grip on the costs and continuity of your business financing and creates room for negotiation with the bank for a lower interest rate.
Risk and price
A standard mark-up for profit and risk is often used when determining the sales price. Good insight into the risks means that you can make a well-considered choice with regard to the surcharge to be charged for profit and risk. If your competitors charge a fixed surcharge and you can make a realistic estimate of the risk, you can offer a well-founded better price for projects with a low risk estimate. For projects where you estimate the risk to be high, you can consider charging a higher price.
The main benefits of risk management are summarized:
- Improving your competitive position, higher margins;
- Better management of existing processes;
- Improving the continuity of your company, reducing unpleasant surprises;
- Increasing enterprise value and confidence in the enterprise;
- Keeping risks insurable;
- Strengthening your negotiating position at the bank