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Identifying and minimizing enterprise risks, both internal and external, is essential for risk management and business growth. Internal risks involve the company’s business model, employee theft, and working conditions, while external risks include new legislation and natural disasters. Contingency plans should be developed to transfer production to other facilities or outsource to partner companies. The scope of enterprise risks varies based on the size and structure of the business.
Enterprise risks come in many different types. Some have to do with the internal function of the business, while others are concerned with external factors that could have some sort of negative impact on the short-term profitability of the business. Identifying these types of enterprise hazards and developing strategies to minimize the impact is an essential function in risk management and considered essential to enable the business to not only maintain its current market position, but enable the company to grow.
Internal enterprise risks often revolve around the company’s own business model. Here, the enterprise risk management department will seek to identify anything inherent in the way the company operates that could pose a measurable risk to the financial stability of the business. For example, risk management will look at what types of checks and balances exist to prevent employee theft, in the form of goods or supplies or in determining proprietary information for competitors. The process will also involve assessing working conditions that may have a negative impact on production or the safety of employees working in these areas, as the lack of adequate protection for employees increases the risk and can cost the company a lot of money by over time. . Enterprise risks of this type often have to do with releasing security in key areas such as access to customer files, accounting records, and research and development activities.
Along with internal corporate risks, attention should be paid to external factors that may have a negative influence on the company or its reputation in the market. Examples include new legislation that could have an adverse effect on business operation, or even some type of natural disaster that destroys major facilities. Depending on the nature of the business, this may involve considering how the company would continue to produce enough goods or services to meet customer demands if one or more facilities were suddenly out of order. To that end, risk management requires developing contingency plans that allow for transferring the production of these goods and services to other facilities, possibly even outsourcing to partner companies if necessary. This can help insulate the company from losing money in the event of a natural disaster, political coup, or any other situation that causes facilities to shut down.
The scope of enterprise risks will vary based on the size and structure of the businesses involved. The risks inherent in operating a multinational company will be more varied than those faced by a small company operating in a single location. In all cases, care must be taken to identify risks relevant to the operation of the business and ensure that plans are formulated to contain these risks, allowing the business an opportunity to grow.
Asset Smart.
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