Risk Management In An Uncertain Global Economy | The Article ...

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By Keith Pollow

Events of recent years, both political and economic, have made many companies aware of their need for risk management. The growing list of problems that now face our society, make corporate boards and presidents very uncomfortable. Mitigating the growing concerns that face the global economy is necessary to ensure success. This is especially true for businesses that rely on foreign operations to create products and provide services.

Concern Over Financial Instability

Risk intelligence, is a consciousness that concerns how certain factors, could potentially go wrong and how potential problems may be avoided. This can be an extremely complex task, that tries to evaluate a company?s assets and operations and determine all tangibles that could disrupt them. Transforming risk management is now the ?hot topic? of current times. The world seems to be changing daily, and businesses must as well to remain profitable.

When economies collapse, mass strikes occur or any other economically disruptive activity happens, businesses can suffer immensely. Once investors get the slightest hint that something may be about to go wrong, they often sell shares. This is why risk intelligence is important and must be discussed. Identifying potential problems that could disrupt financial success will help to mitigate problems once they arise, by developing strategies ahead of time.

Complexity Of Global Relations

In recent years we have seen social upheaval, disposed governments and wars that have changed entire regions. As mentioned before, most large companies rely on a variety of regions to sell or produce goods. Assessing the risk involved, in relation to all business activities is imperative. Failure to do so could be catastrophic for a business greatly affected by global events out of their own control.

Assessing risk for managing effective growth and assets isn?t necessarily a daunting task. Most companies have already developed policies for addressing risk without even knowing it. Doing business on a regular basis, globally, requires in depth knowledge of local populations and economies. The act of developing effective business strategies must have taken local culture and politics into account. A company usually only needs to create a more efficient risk intelligence strategy that has clear goals. Working off of existing business models is widely viewed as the best way to develop a management strategy.

Improving Public Relations

Companies are now under the scrutiny of the public more than ever as well. Once a problem does arise, oftentimes it?s not just investors that become worried. Creating common risk management infrastructures and responses can alleviate the stress create by future problems. When even small problems arise, plans should be formulated and implemented. Smaller issues can be great exercises for determining the future success of larger plans, if they were to become necessary.

The global economy has given many businesses opportunities to succeed that never existed before. Currently, the world faces a lot of uncertainty, making the need for risk intelligence more necessary than ever. Normally, the best management strategy is to evaluate current solutions, and develop future strategies that expand on current policies.

To help portfolio managers obtain risk and scenario based analytics for real time pricing and hedging, R2 Financial Technologies provides industry leading hedge fund risk management software derived from practical risk intelligence.

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