Question

Develop a Financial Risk Management plan for a Professional Consultancy firm in purchasing and supply....

Answer 1

(A) Introduction:

• Every business comes with an inheret portion of "risk" element involved. Therefore, proper planning and management strategies ought to be in place to avoid revenue leakage.
• Of all the types of risks involved- "Financial Risk" (these risks relates to cash inflows/outflows of a firm) has a substanital impact on any business performances. That is why it is important to have proper Financial Risk Management Plan in place.
• Purchasing & Supply of services forms part of scope (scope of services) of a Consulting firm.

(B) Having a proper Risk management team is imperative (scaled as per the firm size):

• They are the ones responsible for developing policy, sharing awareness and lay out best practices for managing the associated risks.
• Don't take the qualifications of team members lighly for it can cost a firm's fortune! Ensuring proper level of insurance for discipline is necessary.

(C) 7 Components of Financial Risk Management Plan:

1. Everything starts with a planning:

• Planning out strategically from who should we buy (our vendors/suppliers) and studying our customer's expectations for efficient selling as per their preferences.
• Having a proper living document for facilitating and engaging firm's risk management team.
• Effectively communicating the tactics amongst the staff and implementing the initiatives,effectively.
• Revise & update firm's startegic plan on regular intervals to avoid the loopholes in the strategies designed.

2. Careful analysis of Clients, Services, Team to engage with:

• Different vendors should be studied in terms of their quoted price range so as to bring out about the shortlisted ones (those not charging exhubertantly high) on board.
• Creating our identity so that we can get best suppliers (for purchases) and clients or customers (for selling) our services.
• Differentiate my product/services to a point that gives my firm a competitive edge over other competitors in market place. How you sell yourself is very important!
• Establishing value of my firm in marketplace by settling in only for honest, genuine firm's practices and creating a brand of our firm and thereby building firm's reputation.

3. Consistent Review & Monitoring process:

• A firm may have an outside counsel to check the risk management team progress and are they are able to carry out their work diligently.
• Performing appropriate risk & reward analysis based on the firm's object and taking informed business decisions.
• Not forgetting to establish/ negotiate Interim Agreement prior to begin with purchase & supply of services.
• Discussing out Scope of services with Clients/ customers.

4. Solid education and understanding of:

• The object with which firm is been formed.
• The short & long term focus and scope of fim.
• Detailed budget and forecasts in place.
• Proper arrangements in times of contingencies.
• A clear draft of schedules to be followed by all.
• Deliverables negotiated for.
• Payment requests initiated.
• Change orders or return orders guidelines.
• Provisioning in cases of change in management (if any)
• An eye into the key clauses/ points (if any)

5. Communicating & Documenting the same:

• Developing a proper Communication plan.
• Ensuring everybody understands everything and taking steps that communication issues doesn't arises and if at all it arises- taking proper course of action to solve the same.
• Thorough and finely filed documentation of what all is communicated across a firm.
• Understanding and planning client decision-making process & documementing it for future help.
• Establish the responsibilities when it comes to documentation and also decide on the frequency to update those documentation.

6. Mangement of services:

• Having proper design and Information Technology (IT) in place.
• Proper Internal control systems and processes and keep checking on the weakness (if any) in such systems and support.
• Enabling decent Software Management and enabling staff performances around it.
• Proper backup & recovery plans and a provision of Cyber- network security on run.

7. Measure & Follow-ups:

• Looking into the performances of staff, their responsibilty and accountability.
• Look into the financial performance standards and working on variances if any.
• Keeping staff and employees within firm updated of any recent developments or amendments in internal control system, IT, risk management strategies, documentation practices.