Question

Other than those mentioned in the chapter, what actions might a company take to reduce risk? (Business Finance Page 194,Chapter 6.) Typing please,thank you.

Answer 1

Action taken to reduce risk-

• Hedging methodology a corporation can take to mitigate risk factors like- credit risk, operational risk, market risk etc. So that portfolio diversification can be possible regarding better trading and settlement.
• Risk management strategies can be implemented in order to control high overhead expenses and manufacturing costs. As a result risk will be spread and suppliers price will get reduced.
• Operational guidelines can be execute in order to deliver right work with in the client deadline. Accounting principles like- GAAP, IFRS will help to maintain proper accounting records and taxation implications. Hence manipulation and tax evasion risk can be eliminated.
• Accounting standards must be follow while posting for depreciation amount and salvage value in the year end. It brings more transparency to the system.
• BCM compliance and program administration must be in place. So that there will be no risk related to supply chain delivery. It also ensures quality performance during the production period.
• Internal audit must be done efficiently for all the financial statements and reports. Hence there will be no risk during third line of defense. Hence chances for foreign investors investment will increases and more cash inflows will generate for the business. Finally debt obligations can be meet in time.

Thus these are the major actions an organisation can take to reduce risk.

All the best for your exam! Thank you!