Business risk: the possibility a company will have lower than anticipated profits or experience a loss rather than profits

Influenced by a number of factors: sales volumes, costs, competition, economic climate, government regulations

The management of business risk is a responsibility shared by many in the organization

Accountants and the finance team share in this responsibility

Business risk is the possibility a company will have lower than expected profits, or experience a loss rather than profits

-More simply, its anything that could go wrong in a business

-Influenced by a number of factors – sales, costs, competition, legal, compliance, reputations

Qs:  What types of risk are there in business? Basically, what could go wrong and what are the implications?

Example:

-Invoices mislaid/misplaced and not paid on time

-Financials may be wrong as expense may not have been recorded if an accrual for the invoice was not done

-Interest was paid to supplier due to late payment – financial loss

This is an example of operational risk in finance, as the purchase was not recorded at the time of ordering, which would have detected this missing invoices

The risk management team may take the lead but as you can see from the example finance may be part of the process that is causing the problem – but if not finance will likely be involved in providing critical financial data at the least

Later in our final module, we will discuss management reporting, which is how we as the Finance team provide management (and risk management) with the data they need to be able to analyze and quantify risks