7 Signs You Need the Help of a Financial Risk Manager

There’s a lot of truth to the old adage “no risk, no reward.” However, there is definitely such a thing as taking on more risk than you can handle, and poor risk management has been the downfall of many once-profitable companies.

Are you unsure of how well your business is handling financial risk? Do you want to make sure you don’t make the same risk management mistakes that other business owners do?

Read on to learn about some of the most pressing signs that you need the help of a financial risk manager.

What Is a Financial Risk Manager?

A financial risk manager (or FRM for short) is a professional who specializes in assessing risks for a variety of businesses, including the following:

  • Banks
  • Insurance companies
  • Regulatory agencies
  • Accounting firms
  • Asset management firms

In addition to identifying certain financial risks, FRMs help business owners to analyze these risks and come up with plans to avoid getting in over their heads.

FRMs have received accreditation from the Global Association of Risk Professionals. To do this, they must pas a two-part exam and spend two years gaining work experience in the financial risk management field.

Signs You Need to Hire One

Not every business needs to have an FRM on their staff. However, they can provide a lot of assistance, especially when you bring them on at the first sign of trouble.

Here are some signs to be on the lookout for that may indicate you need the help of an FRM:

1. You’ve Gone Off-Script

When you first started your business, you likely had a business plan that you were following fairly closely.

A good business plan helps to give you guidelines and a road map to follow when getting your business off the ground. It helps you manage funds in an appropriate way and ensure your business is profitable.

If you’ve gone off-script and haven’t been following your business plan, you might not be on track to be as profitable as you’d like. This is where having an FRM come in and evaluate your position from an objective standpoint can be beneficial.

2. You’re Not Adhering to Regulations

One of the biggest frustrations for business owners is the abundance of regulations (local, state, and federal) that they have to follow.

When it comes to your finances, have you been following all of these regulations and rules to the letter, or have you just been winging it and hoping for the best?

If the latter is true, it’s a good idea to get an FRM to come and evaluate things. They can help you get back on track and ensure you’re in compliance with all finance-related regulations for businesses in your area.

3. There are Issues with Operations

There may be issues with day-to-day operations that are impacting your business’s profitability and financial well-being.

This could be problems with employee production and productivity, technological issues that are dragging the company down, or even natural disasters that halt operations and have an effect on your bottom line.

FRMs can help you navigate these problems with more ease and help you come up with a solution that won’t put your business at risk from a financial standpoint.

4. The Market Is Unstable

When the market shifts or is particularly volatile, a lot of business owners start to panic. Instead of making rash decisions based on emotion, it’s better to hire an FRM who can look at things with more of a global perspective.

They can review your current financial situation and let you know how you’ll fare if the market continues in the direction it’s currently headed. They can also help you make a plan to pivot and weather the storm without going under.

5. The Economy’s Shifted

Economic shifts can also spell trouble for business owners who aren’t well-prepared. If a major economic shift has occurred, such as a recession, you need to work with a professional to figure out where your business stands. The sooner you can do this, the better off your company and your employees are likely to be.

6. You’re Having Trouble with Internal Processes

Internal issues can wreak havoc on a business’s financial situation. For example, if you’re dealing with several vendors who aren’t paying or delivering on time, this could slow down all of your operations and make it harder for you to pay your employees or deliver products to your customers.

An FRM can help you evaluate these situations and figure out where your money’s going.

7. New Laws Are in Effect

Have new laws recently gone into effect that could have an impact on your business’s financial health? If so, it’s a good idea to bring in a risk manager and have them assess your current situation. They can help you make sure you’re complying with these laws and adjust your spending to make sure they don’t derail your business.

Tips for Choosing the Right Financial Risk Manager

Have you spotted any of these signs? If so, you need to start looking for an FRM sooner rather than later. Follow these guidelines to ensure you’re hiring the best FRM for your business’s needs:

  • Consider Their Education: Have they passed the exam to become an FRM (FRM Part 1 and FRM Part 2?)
  • Ask About Their Experience: Have they worked with businesses like yours in the past?
  • Assess Their Temperament: Can they communicate well with you and your colleagues?
  • Don’t Forget Their Fees: Are their rates fair and something you can afford?

Asking yourself these questions will help you get the best person for the job.

Hire a Financial Risk Manager Today

Now that you know more about what a financial risk manager does and how they can help their business, do you think it’s a good idea for you to consider hiring one?

If you’ve noticed any of the warning signs outlined above, chances are good that having a risk management expert on your team will help more than it’ll hurt you.

Keep these tips in mind as you begin your search to ensure you’re hiring the best FRM possible. Visit the Finance section of our website, too, for more helpful resources.

Wealth Creation and Saving Strategies | OnMoneyMaking