How to Protect the Income Statement & The Balance Sheet

How to Protect the Income Statement & The Balance Sheet

There are a many risks that could negatively affect a company’s financials. There are a variety of ways in which a company can manage these events. The companies that manage these risks the best are the ones who excel in their respective industries.

 

There are a number of areas of Risk. To keep it simple, let’s break down these three areas:

 

1. Operational Events:

 

  • A reduction in sales due to market condition,

  • An increase in materials or labor,

  • An increase to any operating costs.

 

2. Insurable Events

  • Damage to Property

  • 3rd Party Liability

  • Insurable Events

  • Ability to earn Net Income

 

3. Organizational Events:

 

  • Poor Leadership

  • Lack of Vision

  • Bad Working Environment

  • Poor Controls


 

This list only scratches the surface, but it is enough to help see what the potentials for risk are and see where they are coming from. This list will allow a business of any type to analyze what is being done to ensure that the risk is adequately taken care of in the areas of concern.

 

In each area, a business should understand what potential there is for a problem to arise and have a plan in place to mitigate the effects. Companies who have an understanding of their environments can adapt quickly and potentially turn a problem into an opportunity.

 

I encourage all businesses to take the time to assess the Risks their company faces and make sure there are adequate controls in place to manage them.

 

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