Yrittäjän talousvalmennus ja yrityksen riskienhallinta

Risk management and analyses for businesses

Companies’ operating environment has changed in recent years. Although businesses have always involved risks, they have now become more concrete than before. Read how you can prepare for the various business risks.

Risks are not automatically negative – they can also be an opportunity. A successful company must be prepared to take on risks.

Business risks

Running a business involves various types of risks which you should identify. It is worth considering your business risks already when starting your company. Your company’s line of business has an essential impact on your risks. Factors such as inflation, higher interest rates, geopolitical situation and legislation may also cause challenges to business operations. 
Business risks can be divided into several risk categories, such as operational risks, strategic risks, financial risks, and risks of loss or damage. Operational risks arise from the company’s personnel, systems, and internal and external processes. Strategic risks may affect the company’s ability to achieve its targets and even threaten its existence.

The materialisation of financial risks affects areas such as the company’s profitability, liquidity and costs. The risks of loss or damage affect the company’s property, personnel and operations if, for example, a fire breaks out.

Corporate risk analysis and risk management plan

Risk management means identifying a company’s risks and assessing, prioritising, minimising and managing them. Through effective risk management, your company can prepare for risks, take them into account in business operations, and prosper through time.

Make a risk analysis for your company. Identify your company’s risks and make a risk assessment. Analyse identified risks and challenges. How probable are they, and what are their consequences? It’s a good idea to put the risks in order of importance based on their impact, should they materialise.
Based on your risk analysis and observations, make a risk management plan for your company to prepare for the risks and minimise their consequences. You should also update your risk management plan at regular intervals so that it fits your business environment and your company’s needs.

Preparing for financial business risks

Risks can be reduced, transferred, avoided, spread and accepted. We can’t control all risks and aspects of life, but we can act in advance to protect ourselves against many risks. 

You can prepare for financial risks by, for example, keeping a savings buffer that you can use if needed. The funds put aside will bring you peace of mind. They can help you make it through difficult times without running into a cash crisis or the need for major adjustments to your business.

If your company has loans, you can prepare for interest rate risks in various ways. Different types of interest rate protection will help you anticipate your future interest expenses, supporting your company’s financial planning. With an interest rate cap, you can make sure that the interest expenses on your loan won’t exceed the agreed level. With an interest rate corridor, you will know in advance the range of fluctuation of your loan interest rate.  

Factoring, on which you can agree with your bank, is a good option for improving your company’s cash and liquidity management. Factoring involves your company’s accounts receivable after delivery of goods or services so that you will get your sales receivables to your company’s account immediately. Invoices assigned to your bank also serve as collateral for the credit.

An account with credit facility adds flexibility to your cash flow and makes sure that you have working capital when you need it for, say, short-term or seasonal financing needs. 

Read more about saving and investing for corporate customers

Read more about preparing for corporate interest rate risks

Read more about factoring

Learn more about corporate accounts with credit facility

Insurance as part of risk management

The contribution of the entrepreneur or key employee is often vital for the operations and success of a small business. Losing this person’s contribution due to, for example, illness may have a major impact on the company’s operations and finances, and the entrepreneur’s personal finances if their assets have been used as collateral for a corporate loan.

By taking out insurance, you can prepare for property damage, vehicle damage, damage caused to a third party, and business interruption. Pohjola Insurance provides you with an insurance package tailored for the protection of your company’s operations and property, including any mandatory insurance required in your sector and other insurance that you may need.

Read more about corporate insurance

With payment protection insurance on corporate loans, you can make sure that the insurance will cover the remaining loan amount should a personnel risk covered by the insurance materialise. As a rule, the premiums for payment protection insurance are tax-deductible, and the premium will decrease as the loan principal decreases.

Read more about payment protection insurance on corporate loans

Responsible operations reduce business risks 

The responsibility requirements imposed on businesses are continuously growing. The more advanced your company is in terms of corporate responsibility, the better its position for the future compared to, say, its competitors that have only started to discuss responsibility matters.

Responsibility should be part of your company’s strategy and embedded in your daily activities. A company that acts responsibly involves less risks as a partner and employer.