Credit risk
Posted: Sat Jan 18, 2025 6:57 am
Credit risk is the possibility of financial losses due to a debtor's failure to meet the terms of a contract. This includes, for example, delays in payments by customers and disruptions in shipments from suppliers.
Let's look at a typical situation. The company gave dealers a one-month grace period without specifying penalties for late payment in the contract. Sudden changes in the weather led to a decrease in demand for car washes. This, in turn, affected the sales of chemical products at dealers. Some customers delayed payment, so the company found itself in a difficult situation: without funds to pay suppliers, the enterprise had to use reserves intended for paying taxes.
In response, changes were made to engineer data package the contract, including the introduction of late fees. In addition, managers began reminding clients of the need to pay on time.
Effective financial risk management includes a number of tasks:
Checking the reliability of counterparties using various services, such as SBIS, Transparent Business, as well as analyzing information on the websites of the tax service and bailiff services.
Competent drafting of contracts with counterparties, including sanctions for violation of established deadlines.
Introduction of a post-payment system for verified clients only.
Financial risks, such as debt risk, supplier default, and investment risks, require special attention. Managing such threats involves planning the company's activities, analyzing transactions, checking counterparties for financial solvency and solvency, and constantly monitoring the economic and political situation.
Not all risks can be foreseen, so it is important for a business to have a buffer to ensure it can survive difficult periods.
Tax risk
We are talking about the possibility of receiving fines from the tax authorities due to late payments or the detection of financial fraud. For example, for splitting up a business.
Tax risk
Source: shutterstock.com
The company may face the following situation: customers will not be able to pay off their debts on time, as a result of which the company will not have enough funds for the next advance tax payment. The director will have to postpone the payment, which will lead to the imposition of a fine.
How to effectively manage tax risk:
Avoid splitting your business, registering employees as individual entrepreneurs and self-employed, and understating your tax base.
Establish partnerships with reliable companies.
Carefully calculate your tax obligations and ensure their timely fulfillment.
Interest rate risk
Interest rate risk is the possibility of financial losses due to an increase in interest rates on a loan. This may happen if the bank increases interest rates in accordance with the terms of the agreement. The interest rate may be linked to the Central Bank's key rate or depend on the fulfillment of certain requirements, such as business insurance or maintaining a certain turnover in the account.
For example, a company takes out a loan with a reduced rate condition upon providing the bank with annual financial statements. However, due to the missed deadline for submitting documents, the rate will increase by several percent. To prevent such losses, it is important to carefully study the terms of the agreement and strictly monitor their compliance.
Effective interest rate risk management involves:
Carefully study the terms of the loan agreement before signing it.
Comparison of terms and conditions of offers from different banks.
Let's look at a typical situation. The company gave dealers a one-month grace period without specifying penalties for late payment in the contract. Sudden changes in the weather led to a decrease in demand for car washes. This, in turn, affected the sales of chemical products at dealers. Some customers delayed payment, so the company found itself in a difficult situation: without funds to pay suppliers, the enterprise had to use reserves intended for paying taxes.
In response, changes were made to engineer data package the contract, including the introduction of late fees. In addition, managers began reminding clients of the need to pay on time.
Effective financial risk management includes a number of tasks:
Checking the reliability of counterparties using various services, such as SBIS, Transparent Business, as well as analyzing information on the websites of the tax service and bailiff services.
Competent drafting of contracts with counterparties, including sanctions for violation of established deadlines.
Introduction of a post-payment system for verified clients only.
Financial risks, such as debt risk, supplier default, and investment risks, require special attention. Managing such threats involves planning the company's activities, analyzing transactions, checking counterparties for financial solvency and solvency, and constantly monitoring the economic and political situation.
Not all risks can be foreseen, so it is important for a business to have a buffer to ensure it can survive difficult periods.
Tax risk
We are talking about the possibility of receiving fines from the tax authorities due to late payments or the detection of financial fraud. For example, for splitting up a business.
Tax risk
Source: shutterstock.com
The company may face the following situation: customers will not be able to pay off their debts on time, as a result of which the company will not have enough funds for the next advance tax payment. The director will have to postpone the payment, which will lead to the imposition of a fine.
How to effectively manage tax risk:
Avoid splitting your business, registering employees as individual entrepreneurs and self-employed, and understating your tax base.
Establish partnerships with reliable companies.
Carefully calculate your tax obligations and ensure their timely fulfillment.
Interest rate risk
Interest rate risk is the possibility of financial losses due to an increase in interest rates on a loan. This may happen if the bank increases interest rates in accordance with the terms of the agreement. The interest rate may be linked to the Central Bank's key rate or depend on the fulfillment of certain requirements, such as business insurance or maintaining a certain turnover in the account.
For example, a company takes out a loan with a reduced rate condition upon providing the bank with annual financial statements. However, due to the missed deadline for submitting documents, the rate will increase by several percent. To prevent such losses, it is important to carefully study the terms of the agreement and strictly monitor their compliance.
Effective interest rate risk management involves:
Carefully study the terms of the loan agreement before signing it.
Comparison of terms and conditions of offers from different banks.