Managing your Business Risk

Most companies today outsource their risk management process to varying degrees, in order to save on time, money and acquiring the necessary expertise. Turn to Benhamou Consulting for the best in quantitative risk management, giving you the data-driven reassurance that your risks are identified, quantified and mitigated against, at a reasonable price.

How effective is your Risk Management Process?

Managing risk efficiently and effectively can be a major factor in the success of an organisation. While many organisations today consider that they manage financial risks very well, only about half of (or in most cases less) respondents to a global risk management survey believe that they manage non-financial risks as effectively.

Deloitte 2018 survey results of institutions' self-assessment of having very effective risk management processes

Having full-fledged risk management plans for all an organisation's risks is not required for most companies. However, some element of risk analysis and management is important, if only to identify the major areas at risk and implement initial steps to help avert those risks.

How can Benhamou Consulting support your Risk Management Process?

Most companies initially develop a risk management plan on their own, however many now outsource this activity, so that the program is designed, developed, implemented and reviewed by risk management professionals. Other benefits include reducing costs and saving an organisation's work hours.

Benhamou Consulting's risk management approach strikes the right balance between rapid, high-level identification and management of the major risk areas, and deep dive, quantitative analyses into the specific risks which need significant attention and budgeting for mitigation. The aim of this approach is to provide executives with an overall view of the company's risks and the steps being taken to address them, while simultaneously providing Risk Officers the deeper understanding of the major risks and the tools required to mitigate them.

What is the first step?

With your collaboration, we analyse your risks and produce a risk universe reflecting your exposure. This is followed by a high-level quantitative analysis of the risk universe, to identify the major areas of concern. This includes metrics you need for executive reports, presented in a standardised, readily usable format for your future use (either as a singular event, or as a repeated exercise).

The report will answer such questions such as:

  • What are the main risk groups and risks to your business?

  • What are the potential financial impacts and probabilities of each risk?

  • What are the top risks (and types of risk) which you need to be concerned about?

  • What are some suggestions of what can be done to mitigate them?

Deep Dive Analyses

Following this, we can identify which risks are most critical, and perform data-driven, deep dives to identify their main drivers. The aim of this is for you to gain a better understanding of the key risks (and their drivers) to your organisation, and in so doing, we can help you identify strategies and processes to reduce their potential impact or likelihood of occurring.

Take this case study as an example

A holding company, the controlling shareholder of one mining, and several industrial companies, knew that one of their main business risks was the value of the main commodity produced by the mining company in their holdings. However, they did not know the magnitude of the risk, and the commodity price had been dropping steadily for the past 2 quarters. The mining company had made an estimation of the break-even price, and had projected that the price would swing back up before reaching it, but the holding company was not confident of their assessment, nor were they sure of the impact to their business.

We were able to provide an analysis for the holding company showing their income structure and therefore their dependency on this one commodity. This was corroborated by tracking their historical revenues from this individual commodity as a function of the historical price, and so estimating their sensitivity to it. Looking to their operating costs, it was possible to estimate the potential loss of income based on a drop in revenue, and how this would impact the financial statement. Finally, we looked at the price forecast, and found it to be overly optimistic in the extreme. We developed our own short term (6 month) forecast - with a probability distribution - based on analysing market drivers, global supply and demand and other metrics, and measured the potential impact of the range of potential prices on the holding company.

This gave the company some idea of the potential losses they were at risk of incurring in the immediate future, and allowed them the time to look at strategies to offset this loss, and look at long-term strategies to reduce their dependence on one commodity price, and so reduce their financial and operating risks.

The what, why and how

As with all things, there are risks for every business, be it operational, financial, strategic, compliance or reputational. We identify what risks impact your business in particular, we investigate why the major risks are so significant, and together we work on how to mitigate them. Deep dive analyses of the main risks provides you with a measure of understanding, certainty and control of them, and gives you the opportunity to make deliberate decisions to mitigate them, supported by data.

Raphael Benhamou, Director

4 views0 comments

Recent Posts

See All