Risk Tolerance Assessments

Risk Tolerance Assessments in Phoenix


We Can Help Identify the Evolving Threats to Your Business at Key Moments


Even when you feel healthy, you go to checkups with your physician, dentist and other professionals at least once a year — and oftentimes more frequently. These exams can expose small changes in your health. Your primary care physician can then recommend minor adjustments that can head off big problems in the future. Shouldn’t your business get the same treatment? 

Regular risk tolerance assessments evaluate your business’s activities, processes and investments to determine the potential for loss. These regular reports can help you make changes to your operations and reduce risks.

Like filling in a cavity before you need a root canal, a risk tolerance assessment can help you optimize your business to meet your goals and avoid long-term threats. 

What Is Risk Tolerance?

Risk tolerance is the degree of risk that an investor, business owner or other principal is willing to accept.

As a business owner, it’s important to understand, assess and re-assess your risk tolerance through the lifecycle of your business. Often, entrepreneurs have an extremely aggressive risk profile when starting a new business because startup costs can be high and success is uncertain.

 

As your business matures and you establish a reputation in your community, build a roster of clients and enjoy enduring success, you may become more conservative and want to shift your perspective to potentially selling your business. On the other hand, you may want to continue aggressively growing by making a merger or acquisition with another company.



How Often Should You Conduct a Risk Assessment?

Every business is different, and the frequency that your business may require a risk assessment depends on your industry and goals as an owner and leader. If it’s early in the life of your business, you might be willing to assume significant risk to get your company off the ground. As your business grows and you consider adding staff, acquiring companies or diversifying, you may consider conducting a risk assessment as part of your due diligence process.

 

Changes in economic conditions, political situation (especially if your business is closely aligned with government activities), the environment or technologies are all good reasons to conduct a risk assessment. For example, if the economy is headed toward a recession, residential construction businesses may need to prepare for slower growth in the short- and medium-term.




What are the Benefits of a Risk Assessment?

Like the old saying goes: knowledge is power. Risk assessments may give you the edge over your competition by providing expert analysis on:



  • Whether to make a new investment
  • When to sell assets or wind down segments
  • How to mitigate potential risks
  • Identifying potential upsides that make risk-taking worthwhile


Mitigating Risks to Your Business

If owning and running a business were easy, everyone would do it. As a business leader, you know many of the short-, intermediate- and long-term risks to your business, but a risk assessment can help you measure the potential costs and consequences you might experience if those risks manifest and potentially uncover unknown or unexpected threats.

 

If your risk assessment discovers unwanted risk, there are a variety of ways to mitigate them. You may alter procedures to eliminate risky practices. It might be advisable to hand off risk to a third party by outsourcing the activity or buying insurance. If you have a deep knowledge of the risk area, you may decide you can effectively manage the risk.

 

If you have questions about risk assessments and want to schedule a consultation to see if there are excessive or unknown risks facing your business, call H&H Accounting Services today at 480-561-5805.



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