“Good risk management fosters vigilance in times of calm and instill discipline in terms of crisis.”


Dr Michael Ong’s above quote emphasises the preventive measures that need to be put in place in corporations, companies, and other organisations that mitigate financial risks and losses. Risk management is an area that deals with providing solutions to avoiding potential risks and hazards that may affect the corporation. It’s always said “precaution is better than cure”, wherein it’s practical and viable to lay out a plan to stop the occurrence of a negative situation. The same can be said for risk management, where financial precautions are placed to avoid failures (losses, debts and risks) if something doesn’t go according to the economic strategy plan.


Mitigating risks, rendering monetary solutions, and helping organisations maintain economic growth is among the best financial risk management practices. Professionals looking to move into a financial risk managerial role can opt for professional finance courses available online. Among these certified courses, the risk analysis certification from IIM Kozhikode helps executives learn the finer aspects of this domain. Financial risk management is performed through a step-by-step pedagogy, and upcoming managers need to know the process for the same.

financial risk management concept

Steps Involved in Financial Risk Management Process

Professional finance courses provide professionals with a guided step by step approach for conducting risk analysis for their organisations. Financial risk management is a structured framework for mitigating risks.


The following step-by-step methodology helps in managing financial risks for the corporation:-


  • Step 1 = Identifying the Financial Risk/s


The first step is recognising the financial risks that are associated with corporational policies, strategies and plans. The risks could be of different types- credit, market, foreign exchange risk and others. Upon identifying risks, it’s crucial to make risks visible to employees, team members, and stakeholders to develop an action plan.


  • Step 2 = Conducting Financial Risk Analysis


Analysing the risk revolves around figuring out its scope, severity, seriousness and extent of influencing company’s policies and financial assets. Prioritising the financial risk based on different factors and then convocating a framework for mitigation must be implemented.


  • Step 3 = Evaluating the Financial Risk


The third step includes evaluating financial risk/s. Evaluation is done based on harm associated with risk. Slight inconveniences related to risks are ranked on the lower-risk level, and those with immense volatility are marked with high-level risk. After that, risk managers need to interact with C-level executives and senior associates to deal with financial risks and set up viable precautionary measures.


  • Step 4 = Monitoring the Financial Risks


The fourth step of financial risk management revolves around monitoring and reviewing the risks. Financial risk managers must ensure that potential risks and hazards are being closely watched and reviewed.


The steps, as mentioned earlier, of financial risk management, are performed in different phases to minimise the risks and hazards and help organisations maintain steady growth. Certain principles govern financial risk management processes. The risk analysis certification from IIM Kozhikode teaches learners about different principles that help in managing risks effectively.

financial management online certification


Understanding the Principles of Financial Risk Management

Be it financial accounting or financial management, these domains have procedures that determine the success of mitigating risks and minimising losses and debts incurred by companies. Several knowledgeable professional finance courses aim to provide robust understandings of trademark principles associated with financial risk management.

These principles help in analysing, evaluating and managing risks efficiently.


Here’s a list of principles that define financial risk management:-


  • Integration of Financial Risk Management in the Company’s Policies

Traditionally, organisations vet out their policies, action plans and other strategies for analysing, evaluating and managing risks separately. There’s a separate department focused on minimising risks and incorporating preventive measures.


However, with the complexity of corporates’ projects today, it’s always a good practice to integrate financial risk management in each stage of corporation process, procedure, and work-flow. Doing so gives a holistic view of operations and helps in mapping out the potential financial hazards.


  • Financial Risk Management Approach Should be Structured and Customisable

A typical financial risk management plan should be developed so that it’s structured and customisable and doesn’t compromise organisational goals. Surveying the critical processes involved in the corporation work-structures, a financial risk management methodology must be laid out that suits the corporation.


A large organisation must prioritise managing higher severity risks first and then focus on other less volatile risks, whereas, for a smaller firm or startups, it’s essential to mitigate the smaller risks at the earliest. Therefore, approaches should be developed accordingly.


  • Inclusiveness

Financial risk management should be inclusive. The strategy, plan, or financial risk management process should include every stakeholder, team-member, and company employee involved in the corporate’s structure.


  • Financial Risk Management Protocols Should be Dynamic

Risk managers must ensure that their policies are dynamic and adaptive in nature. Financial risk management procedures might have to change due to factors such as the introduction of new government laws, changes in operational work-flows and others.


Hence, having a flexible risk management plan will allow it to incorporate those changes and eke out the risks and hazards.


  • Has a room for Continuous Refinement and Improvement

Once a financial risk management strategy is developed and implemented, it needs to be improved and enhanced to better mitigate the potential risks. Continuous refinement and improvement of strategies help in making it better equipped for analysing future risks.


  • Leverages Technology

A robust financial risk management process leverages technology for gathering useful insights on the areas that can breed risks and hazards. Technology can be utilised for accumulating, analysing and evaluating different risks.

Principles that Lead Towards Practical and Successful Financial Risk Management

The principles discussed in this article facilitate successful financial risk management and help in avoiding financial losses and debts. Having a robust financial risk management plan can assist corporations in their growth and bring in more profits.


Therefore, enrolling for professional finance courses and certified programs will allow aspiring managers to mitigate risks efficiently. Moreover, receiving the risk analysis certification from IIM Kozhikode will enable professionals to attract lucrative job roles.



More Information:

Risk Management and Its Importance

Why is it Important to have a Risk Management Plan?

Career Prospects in Advanced Financial Risk Management

The A-Z of Building a Career in Financial Risk Management

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