Assessing business risks and using your assets wisely

In today’s ever changing and challenging economic environment, it is impossible to eliminate all the risks that can adversely impact on a business.

However, it is important to make every effort to assess the most reasonable risks and plan accordingly.

Identifying and mitigating risks is a crucial component of risk management. Whilst most small businesses cannot afford to employ a full-time risk manager, there are preventative steps they can take to help protect their businesses from possible threats.

Categories

Most businesses will need to look at four main categories that are likely to impact at some stage in their development

  • Environmental
  • Financial
  • Management
  • Supply

It is important to review the list in order to see exactly what risks might apply and develop an action plan to address any critical issues.

Enhanced business review

It is now mandatory that all large and medium sized companies include an enhanced business review in the Annual Directors’ Report.

This review must include a fair review of the business and a description of the principal risks, and evaluating business risk should never be put on the back burner to address at some future stage,

Indeed, all prudent business owners automatically review risk on a regular basis.

Questions

Although much of managing risk is common sense, it could be helpful to address the following questions:

  • Have you measured the most important risks?
  • Have you considered who should be doing what in case of problems?
  • Do you know which risk is likley to have the biggest impact on your business?
  • Does your business have proper planning for risks?

Use your assets wisely

Whilst economic uncertainties continue to dominate the headlines, business life has to go on. The only way to guarantee the survival of your business is access to working capital and a renewed focus on cash flow.

For years, raising finance has been a buyer’s market with lenders falling over themselves to provide unsecured finance to businesses. Now lenders are nursing their wounds from the losses incurred but there are still lenders around to finance your business.

However, even in the world of non-bank lenders, the rules have changed. Lending is now focused on matching lending to assets. The art is for business owners to k ow which lenders will generate the most cash flow against the assets on the business sheets.

Asset Based Lending

As the Asset Based Lending market continues to grow, providers are developing strong niches where their clients can benefit from greater added value.

Higher level of finance

Given the circumstances facing many UK based businesses, Asset Based Lenders come into their own. They allow a business to leverage a higher level of finance than more traditional funding methods, they generate cash against a wide range of assets such as trade debtors, stock, property, plan and machinery and even intangible items such as brands or future orders. All this while retaining the relationship with just one provider.

Flexibility

The flexible approach utilised by many Asset Based Lenders enables them to focus on the fundamentals and future prospects of a business rather than just the immediate training.

Synergy

There are literally dozens of innovative lenders around. However, the trick is to find the synergy necessary between, to create the optimum solution tailored precisely to the borrower’s needs.

Seeking out unfit directors

One of the roles of the insolvency service is to investigate the behaviour of the directors of insolvent companies. Directors found to be unfit can be disqualified.

When a business has failed, the Official Receiver (or Insolvency Practitioner in a Creditors’ Voluntary Liquidation, an Administrative Receivership or an Administration) has to report the conduct of all directors who were in office the last three years of trading.

A decision is then taken to decide on whether it is in the public interest to seek a disqualification order. An applications is heard and decided by the Court. Alternatively, an individual can give a disqualification undertaking without having to go to Court.

Examples of conduct leading to disqualification could include:

  • continuing to trade to the detriment of creditors at a time when the company was insolvent
  • failure to keep proper records
  • failure to prepare and file accounts or make returns to Companies House
  • failure to submit tax returns or pay over to the Crown tax or other monies due
  • failure to co-operate with the Official Receiver or Insolvency Practitioner.

About Irwin Insolvency

Many businesses face financial challenges. If debts are building up and no matter what you do the situation seems to get worse, it can be difficult to know how to cope or where to turn for help.

At Irwin Insolvency, we have a personal understanding to sympathise with your financial situation. With our many years of experience, we will be able to provide you with advice and guidance no matter what financial situation you are in.

To speak to a member of our friendly team, please call us on 0800 009 3173.

Contact Irwin Insolvency today for your free consultation

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About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency, rescue and turnaround.