Question

Please list and describe types of preventive measures (risk prevention methods) against financial risks.

Answer 1

Risk management involves putting methods, processes, and tools in place to deal with the consequences that have been identified as significant threat to the business

There are four ways of dealing with every risk that have been identified: accept it, transfer it, reduce it, eliminate it.

The following preventive measures can be used to mitigate againt financial risks:

1. Identify the risks. It is really important for a business to identify the risks first so that the appropriate preventive measures can be used to mitigate it.

2. Perform quality control tests. Having a test group or beta test so that the product can be improved before the real launch. This will increase the chances of success and will make the product financially viable.

3. Diversification of income: Whenever possible, the enterpreneurs should diversify the sources of income so that there is a backup plan to keep the businessman out of bankruptcy.

4. Buy Insurance: The businesses can purchase insurance against death, disaster and other things. Although it does cost money, but it also hedges the financial risk.

5. The evaluation of business operations should be carried out for efficiency. It would help the business become financially efficient if the workflow is analyzed at least one a year to know where the costs are and what are the areas where savings are possible through cost cutting due to increased efficiency.

6. A strong risk management policy should be there in place if the need arises.