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Building a More Resilient Business in 2025

By: Aldrich CPAs + Advisors

Three Steps for Structured Risk Management

Every business faces financial risks – there’s no way around it. Market volatility, shifting customer behaviors, expansion of tariffs, and operational hiccups could challenge your bottom line if left unmanaged.  

A structured risk management process helps you anticipate potential challenges, take action to minimize their impact and position your business for steady, long-term growth. By planning for specific scenarios, leaders can safeguard their bottom line and seize opportunities to thrive in a rapidly changing landscape. 

Step 1: Identify and Assess Your Financial Risks

The first step is to identify which financial risks pose the greatest threat. By examining your business through multiple lenses – credit, liquidity, market, operational, and strategic risks – you can gain a clearer understanding of where your biggest vulnerabilities lie. Are you heavily reliant on one large customer who could default? Do you have tight cash flow cycles that leave you exposed if a supplier misses a shipment? Are there weak internal controls that open the door to fraud? 

Effective identification starts with sound controls and reliable data. Regularly review financial statements, track payment trends, and examine operational workflows. Forecasting and scenario planning models can reveal patterns before they become problems.  

Step 2: Mitigate Financial Risks

Not every risk calls for the same approach, so you may need a combination of tactics to safeguard your financial health. Consider these main avenues of mitigation:  

  • Risk transfer: When a risk is significant but difficult to control on your own, transferring some or all of the exposure can make sense. This often means purchasing insurance policies that cover property damage, business interruption, liability claims, or cyber incidents or outsourcing certain functions to third parties with established expertise.  
  • Risk avoidance: Sometimes, the most cost-effective solution is to step away from a particular activity altogether. This approach works best when the potential upside doesn’t justify the ongoing vulnerability or complexity that the venture introduces. 
  • Risk reduction: Strengthening internal controls, like segregating duties, conducting routine audits, and updating cybersecurity measures, can significantly reduce operational or fraud-related risks. In addition, taking steps like improving credit policies, adding supplier diversity to counter supply chain disruptions, or refining cash flow forecasting can help reduce potential risks. 
  • Risk retention: Risk retention works when the impact is manageable and you’ve prepared for it. Self-insurance, for example, can handle small, routine losses without involving expensive coverage. 
Step 3: Monitor and Adjust Regularly

Risk management is not just a one-time activity. As economic conditions shift, technologies evolve, and your business grows, the risk landscape changes. Regularly reviewing key risk indicators and reassessing your strategies helps ensure that your chosen mitigation techniques remain effective. Fine-tune your approaches as needed, and don’t hesitate to pivot if new information suggests a better path. 

Put Risk Management Into Action

A structured, proactive approach to financial risk management gives you more control over your company’s future. It helps you move beyond firefighting, enabling you to operate from a position of strength and foresight. 

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