Business risk management is fundamentally associated with three basic functions, regardless of the type of industry, in which a certain company operates. Those are:
a) The definition of the risks related to that certain type of operation, as well as the generic risks related to any kind of business, in regards to the basic business management functions, e.g. production, human resources, finance.
b) The assessment of the possibility to materialize, of each and every of those risks, combined with the application of methods of forecasting.
c) The implementation of preventive measures so that risks with the highest probability to happen may be avoided and their possibility of occurrence may be reduced or even eliminated.
The notion of risk is inherent to the conception, planning, establishment and management of a business entity. The proprietor (or proprietors) or the shareholders are aware of the fact that the capital they invest in a specific business plan is always in risk and they might end up losing it. However, this risk is compensated by the dividends and increase of equity they enjoy, as a result of business profits.
Specific sectors of the economy face different risks than others. Despite and beyond that fact, the central role of time cannot be overestimated, when we study its impact to business risk. According to certain theorists, economic activity takes place in cyclical movements, with times of recession giving way to times of economic booming. Therefore, a company should assess the point in the economic cycle, where it currently stands and recognize the respective risks and opportunities related to that. The loss of opportunities can be of critical importance, since it can slow and even halt a company?s progress, endangering its future, turning itself, this way, into a risk.
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Source: http://rblog.info/mgmstress/2011/10/08/aspects-of-business-risk-management/
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