Maintaining the effectiveness of the company in case of negative events
Minimizing the loss of time, money and business reputation helps ensure the long-term existence of the company and increase its profitability.
Ensuring transparency of processes at all levels
Systematic assessment and optimization of business processes will allow you to identify their potential improvements and additional opportunities.
Increased planning accuracy
Avoiding constraints leads to increased profits in the long run.
Compliance with industry legal regulations
For some industries (such as banks and insurance companies), financial risk management software allows to document risk analysis and develop strategies and implement pre-defined measures.
Risk management stages
Our enterprise risk management software and credit risk management software tools allow you to structure the work with risks in a structured and professional way throughout the organization and systematically perform the following steps: identify and compare risks, regardless of their source; categorize individual risks into individually defined categories; assess the collected risks depending on the type, the likelihood of their occurrence and the consequences of their impact. The result of this assessment is the prioritization of risks; define risk management strategies (avoid, reduce, transfer, accept); initiate activities to counter the identified risks in order to minimize negative consequences and the likelihood of their occurrence; monitor, collect reports and document all risks according to predefined criteria.
A cyclical approach to risk management
In each company, the risk management process requires an individual approach, since the types of risks and their interrelationships can differ depending on the industry, the structure of communications and the size of the company. Since the risk management process is very complex, it makes sense to subdivide it into the following sub-processes, which can be easily implemented and standardized. Each of these sub-processes is reliably performed using risk management software: collect all individual risks; create a risk model; build a risk matrix for prioritization; define a risk strategy; periodic assessment.
Features and functions
Our software allows you to collect and assess risks, evenly covering all work processes of the company as a whole. Your functional benefits are as follows: structured risk assessment with freely definable categories; determination of risk prevention measures; automatic control of the schedule of events; risk management workflow automation; easy to understand and expandable risk catalog; creation of documentation (often required by law) based on historically collected information that cannot be compromised; adaptable concept of rights and roles with clear responsibility for each step of the risk management process; large-scale customization at all levels.
All companies face risk; there is no reward without risk. On the other hand, too much risk can lead to business failure. Risk management strikes a balance between risk acceptance and risk mitigation.
Effective risk management can add value to any organization. In particular, companies operating in the investment industry rely heavily on risk management as the foundation that enables them to withstand market crashes.
An effective risk management framework aims to protect the capital base and profits of the organization without hindering growth. In addition, investors are more likely to invest in companies with good risk management practices. This typically results in lower borrowing costs, easier access to capital for the firm, and improved long-term results.
There are at least five critical components to consider when creating a risk management framework.
The first step in identifying the risks a company faces is to define the mix of risks. The universe of risk is simply a list of all possible risks. Examples include IT risk, operational risk, regulatory risk, legal risk, political risk, strategic risk, and credit risk.
After listing all possible risks, the company can select the risks to which it is exposed and classify them according to the main and non-core risks. The main risks are those risks that a company must take in order to increase productivity and ensure long-term growth. Non-core risks are often insignificant and can be minimized or completely eliminated.
Risk measurement provides information about the magnitude of a particular risk or cumulative risk, and the likelihood of loss as a result of these risks. When measuring exposure to a specific risk, it is important to consider the impact of that risk on the organization's overall risk profile.
Some risks may provide the benefits of diversification, while others may not. Another important factor is the ability to measure exposure. Some risks may be easier to measure than others. For example, market risk can be measured using observable market prices, but measuring operational risk is considered an art and a science.
Certain measures of risk often give rise to the impact on profit and loss (“P/L”) that can be expected if there is a small change in that risk. They can also provide information on how volatile the P/L can be. For example, the equity risk of an equity investment can be measured as the P/L impact of a stock as a result of a 1 unit change in, say, an S&P 500 index or as a standard deviation. specific promotion.
Common measures of aggregate risk include the value of risk (VaR), risk-return (EaR) and economic capital. Techniques such as scenario analysis and stress testing can be used to complement these measures.
By classifying and measuring its risks, a company can then decide which risks to eliminate or minimize, and which portion of the underlying risks to keep. Risk mitigation can be achieved through direct selling of assets or liabilities, buying insurance, hedging with derivatives, or diversification.
Risk reporting and monitoring
It is important to regularly report specific and aggregate risk metrics to ensure that risk levels remain at optimal levels. Financial institutions that trade daily will issue daily risk reports. Other agencies may require less frequent reporting. Risk reports should be sent to personnel who have the authority to adjust (or instruct others to adjust) the risk exposure.
Management of risks
Risk management is a process that ensures that all employees of the company carry out their duties in accordance with the risk management system. Risk management includes defining the roles of all employees, assigning responsibilities and assigning authority to individuals, committees and the board of directors to approve key risks, risk limits, exceptions to limits and risk reports, and for general oversight.
Effective risk management is critical to achieving financial stability and superior performance in any company. Adopting a risk management framework that builds best practices into a firm's risk culture can be a cornerstone of an organization's financial future.
Minimize the impact of risk across your company with risk management software tailored to your workflow. Our experts and outsource developers will be happy to help you: provide services that are perfectly tailored to your industry and your company.