Financial risks are one of the most important and interesting areas of economic theory. Their management and forecasting have long turned into a whole area of ​​activity - risk management. Without experts specializing in this topic, the work of any large enterprise is difficult. This is a huge set of analytical works, which we will try to give ​​in this article.

What Is It?

In the business environment, there is an opinion that the longer an enterprise has been operating, the older and larger it is, the larger the activity and the operations it performs, the more it is exposed to various risks, the main of which are financial. Any entrepreneur and owner of a particular company dreams of taking his business out of the danger zone. However, in the era of globalization, this is not easly possible. Therefore, traders can only manage these risks and try to reduce the likelihood of negative consequences for the enterprise.

However, as far as finance is concerned, the term “financial risk” excludes ambiguity. It means only and exclusively the danger of losing money resources. That is why the main goal of risk management is to reduce the likelihood of their partial or complete loss. Achieving this goal is one of the main conditions for the successful development of a large enterprise. And not only a participant in the financial market. Any company that considers itself quite impressive has financial interests - from stocks to investments.

Nevertheless, we note that those enterprises whose activities lie in the plane of dubious (from the point of view of financial experts) transactions are more exposed to risks. We are not talking about legal violations, we mean speculative manipulations. In this case, the main interests of such enterprises are - the level of profitability or losses from such operations and, of course, the threat of insolvency.

What Are They Like?

However, the likelihood of going bankrupt is just one of the financial risks, of which there are actually many. They appeared along with money and business relationships that have developed over the centuries between participants in the financial market - investors, creditors, buyers, sellers, etc. As a result, risks have become commonplace and even integral to businessmen. Over the years, they became more and more. Therefore, in order not to get confused, a special classifier was created in due time.

The main signs by which risks are classified are the object of a particular operation, the nature of the consequences, the period of time, the likelihood of negative events, inflation, the possibility of forecasting, etc. Considering these signs, financial threats are usually divided into three groups.

Three Types of Risks

The first group is the dangers that are associated with the purchasing power of money (that is, how many goods and services can be purchased for a certain amount of means of payment). This includes inflation, deflation, currency depreciation, and reduced liquidity.

The second is the dangerous phenomena associated with investments. This group of hazardous phenomena includes the likelihood of losses associated with an investment in certain projects. The same applies to the likely losses when investing in financial instruments and innovative products. In addition, this type of risk includes a reduction in financial stability - capital that guarantees the solvency of a particular enterprise. Direct financial losses and lost profits are also related to this type of risk.

The third group is threats that affect the activities of persons involved in the production and sale of goods and services. That is, the risks of economic activity.

We will not delve into how each of the risks assigned to one of the three groups of risks works and what negative phenomena are meant by it, we will not. This is already academic, educational information. Let's move on to assessing risks, how this happens and what kind of methods are used in this assessment.

Four Main Methods

In modern practice, four main methods of assessing financial risks are used. In what combination they are used depends on the amount of data available for each of the risks. One of the most accurate assessment methods is considered "economic and statistical". It, as the name suggests, is based on economic statistics and takes into account not only official data but also information collected for various private studies.

The problem is that official statistics do not always reflect the real situation. That is why the information obtained in the course of economic and statistical evaluation needs to be confirmed by another method - calculation and analytical. It cannot be called as accurate as the previous one, but it makes it possible to understand how bad the statistics are. For this, the financial planned results of the activities of enterprises participating in specific industries are used.

Another method for assessing financial risks is called analog. It is used when you need to find out a possible threat in a particular market. And here the experience of operations carried out on it is analyzed.

The last of the main assessment methods is expert. It is needed when there is no data that can be compared, there is no calculated and statistical information. In such cases, the information obtained in the course of surveys of experts in a particular field is analyzed. They undergo mathematical processing and then form the basis of an analytical reference.

Assessing financial threats is the main piece of risk management work. This is a whole system for analyzing a huge amount of information. And the assessment can be both qualitative and quantitative, but its constant task is to identify threats to the activities of the enterprise.

Management Strategy And Tactics

Financial risk management is carried out on the basis of estimates. Management is meticulously planned work. It is part of the concept of financial management. In fact, risk management is a complex and combination of techniques, methods used, and measures are taken that make it possible to track, calculate and predict with a high degree of probability threats to a business. This is due to the intense search for the necessary information and its correct interpretation.

However, predicting risks is half the battle; you also need to prevent them. And these are already questions of tactics and strategy. What will be the strategy of actions of this or that company in the face of impending problems depends on the entire management team. And the task of risk management is to choose to set the desired vector and suggest the correct direction of the strategy.

One way or another, but risk managers are highly demanded specialists. Becoming such an expert is not easy. But, if there is a desire to try yourself as a participant in the financial market, and in the future to conquer higher peaks, then you need to strive for this. And you can start with simple things - creating working tools. One of them is a checking account, which is necessary not only for work but also for solving everyday tasks. The most convenient is an account with a European company, for example, Billings. Many experts are sure of this.

Mika - Engineer and Business Developer