Using each of the four categories of risk, develop an analysis of how financial management techniques or policies can be used to mitigate each of the risks.

BUS650 | BUS650 | Ashford University

1. Strategy Risk: Financial policies and techniques can be applied to reduce strategic risk. This includes creating detailed plans that will help the company achieve its objectives. It could be setting budget targets and financial projections. Monitoring key performance indicators can help measure the progress towards those goals. It may also include implementing strategies like diversification or cost cutting in specific areas to increase profits and sustain the business for the long term.
2. Operational risk: Financial management policies and techniques should be designed to identify potential problems in advance of they happen, as well as preventive measures that will keep them from occurring. It could involve regular internal audits and the creation of systems to balance operations.
3. Market Risk: You can mitigate market risk using financial management strategies or policies. For example, diversifying your investments in different asset classes to decrease exposure to one sector or trend. Engaging professional advisors with knowledge about industry trends and regularly reviewing the portfolio against benchmarks to adjust investments as necessary.
4. Credit Risk. Financial management policies or techniques can be used in order to minimize credit risk. These include closely monitoring customers’ accounts for payment defaults and establishing lines credit with multiple lenders to ensure that funding is available, even when economic conditions are difficult. This allows financing to be made available to those who need it most. Customers who cannot or refuse to pay their invoices on time can reduce losses by using debt collection agents or lawyers who specialize in debt recovery.

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