Identifying risks key to business success

CEBU, Philippines - Although companies practice risk management, prioritizing such risks serves as the missing component in the booming local business community, an expert said.

Institute of Internal Auditors-Philippines President Juancho Robles acknowledged how Cebu businesses practice risk management but advised entrepreneurs to identify the top risks to efficiently achieve their objectives.

According to the principles of risk management, he added that it is proper to clearly set the business objectives first, identify all the barriers, indicate the key risks, formulate action plans and implement the risk policy.

“Many of them do risk management except they don’t call it such. However, you may be managing risks that are not important or you may come up with action plans without clear understanding. And that’s the missing part,” he said.

He noted that it could be more costly for a business without proper risk management, thus a day-to-day evaluation, monthly updates in the risk register and an overall annual compliance of risk management are recommended.

“What if the top risk is equal to 5-7% of annual revenues and if you don’t properly identify and manage those, it could contribute 10 -15 % of your losses. Indicate the key risks and you’ll probably solve 80% of your problem,” Robles stated.

He then encouraged business owners to practice the principles of risk management in their companies and apply it to achieve their desired success.

He also cited that the top three common business challenges are regulatory risks, workforce competencies and capital risks.

Once an entrepreneur becomes an expert in risk management, he said that the owner can eventually exploit the risks to his advantage.

Meanwhile, he noted that micro, small and medium enterprises only practice the layman’s term of management compared to corporations who are required to establish the process in accordance to the corporate governance manual including the banks.

Financial Executives Institute of the Philippines (FINEX) – Cebu President Melita Ramos, on the other hand, said in a separate interview that the MSME sector needs more education in managing risks for further development.

“In any business, risk is always there. If you learn the ways on how to handle them, well you will be able to also properly handle your business. Risk is like a gamble. Whether you win or lose, you spend and put all your resources for the business. At the same time, you take the risk of what is going to happen after you put everything,” she stated.

She added that good governance and compliance with the risk management policies could lead to harmonious operations and survival of the business.

As part of the celebration of the Cebu Business Month, the seminar entitled as “Enterprise Risk Management and Managing Costs Using a Risk Management Approach” was attended by accountants, bookkeepers, chief executive officers, corporate managers, bankers and the academe with Robles as the speaker and FINEX as co – organizer of the Cebu Chamber of Commerce and Industry. — (FREEMAN)