Information as a Competitive Advantage – Part 8, Risk Mitigation


By Kostis Panayotakis


Risk management has always been a critical issue in business. Banks lending money to tens of thousands of Customers, are in absolute need of an internal automated credit risk management system. Businesses which sell products or services on credit, also need to manage credit risk. High value transactions need to be carefully evaluated, vis-a-vis risks of non payment. Customer-information-based credit risk rating systems, allow individual Customer as well as aggregate credit risk evaluation. Past customer payments behavior information, should be captured and used to evaluate future transactions. Dunning systems used in the Telecom sector, aim to manage non-payment risk, while not hurting the Customer relationship.

Risk scoring is usually done in the banking sector, during loan approval procedures. Aggregated credit risk scores (e.g. for all outstanding loans), provide management with information on total credit risk.

Risk scoring systems shape and reflect the nature of the lending decisions, made on a daily basis. The degree of complexity (number of information parameters participating in the scoring model) of risk scoring systems, varies. Higher complexity risk models may yield more accurate risk estimates, while lower complexity models are probably easier to apply. Operating performance can be analyzed based on financial indices (e.g. revenue to invested capital ratio). It can be analyzed in time (time series analysis), or compared to the industry average. This analysis may alert the business, on the risk of reduced competitiveness. Liquidity ratios produced by accounting systems (based on cash, accounts receivable and payable etc), can be used to monitor against low liquidity or bankruptcy risk.

All risk management systems are based on information integrity and accessibility by the responsible roles (e.g. risk manager). The timely use of information is also a critical success factor. The value of information vis-?-vis risk management, is reduced with the passage of time (the sooner a risk is identified, the better the chance to mitigate it).

Many other types of business risks, may be managed via an information driven approach. An information-driven approach, leads to more efficient risk management.

Copyright 2006 – Kostis Panayotakis

Material relevant to information management, can be found at http://www.pleroforea.com Kostis Panayotakis - http://www.pleroforea.com


More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Management Information:

Related Articles

On The Job Training is Something You Can't Afford to Skip
Trained employees are more productive employees; there's no doubt about that. Whether you're your only employee or whether you've got a growing staff, put OJT (on the job training) at the top of your To-Do list.
People Literacy
Every Manager has experienced the frustration of not understanding why one management approach that works beautifully with one employee is ineffective with another. That's because what we think would be motivating isn't always motivating to someone else.
Big Company Intelligence on a Small Company Budget
Information is the lifeblood of the economy. That's especially true for businesses, because the ability to identify current customers and locate new prospects makes the difference between boom and bust.
The Survey Feedback Process for Organizational Development and Change
THE PURPOSE OF SURVEY FEEDBACK:In globally competitive environments, organizations are seeking information about obstacles to productivity and satisfaction in the workplace. Survey feedback is a tool that can provide this type of honest feedback to help leaders guide and direct their teams.
Doing More With Less
This is a bottom-line environment.Decreasing the downtime of revenue producing employees is a major concern.
Is Your Management Style Assisting or Hurting Your Business?
Many times business owners can have significant differences in management styles that can deter the growth of both the employees and the business.Employees can have differing needs that require differing methods of management as well.
Structure Your Payment Offers to Sell More Products
The way you structure your payment offers can increase your sales. I'm not talking about the way people pay like credit cards, digital payments, checks, and cash options.
Using the Six-Sigma Methodology to Improve Wafer Fab Productivity
As a result of consolidation of operations and significantly increased production requirements, Intersil's main Fab was facing bottlenecks in supply versus demand. Intersil enlisted Tefen USA first to support identifying the Fab bottleneck, and then to develop a comprehensive roadmap for capacity and cycle time improvements.
Meeting Your Meeting Expectations
"To get something done a meeting should consist of no more than three people, two of whom are absent."~Author unknownOne of the complaints I hear most often is about the number of meetings people attend during any given week.
Transparency: A Key To Your Effectiveness
Last month I talked about the Skilled Facilitator principle of being curious. This month I want to talk about the complementary principle transparency.
Know Your Client - The First Rule of Business Coaching
Whilst the very best coaches have undertaken independently accredited training and or have years of experience with clients, new self-assessment questionnaires are coming available which is evolving coaching into a far more focused activity. And that is to the benefit of coach/client relationships for the following reasons:- Key AreasResults from assessments enable the coach and client to understand key areas for development and the client can then choose which will be most beneficial.
Compensation and Six Sigma Black Belts
One of the more ambiguous elements of a Six Sigma project is the level and type of compensation the organization should give to its Six Sigma leaders and team members. On the one hand, setting compensation is not an integral part of any stage of a Six Sigma project; on the other hand, compensation is an important instrument to build loyalty and a sense of accomplishment that is a crucial element to the organization's Six Sigma success.
Ringing Doorbells Without Howitzers
Many operations leaders have been there, done that with re-engineering. And they report, in effect, that the process is like ringing a doorbell with a howitzer shell.
Catch Your Staff Doing Something Right
A long time ago, I learned something about being a manager that has proven to be one of the most valuable lessons I've ever heard.You can't manage people from inside your office.
Implementation the Catalyst of Change for Management to Reach that Next Level of Success
From the personal and professional experiences of other colleagues and myself, one of the more critical success factors for management is implementation. Through my observations, I have discovered that people and organization spend a great deal of resources including time, dollars and the cumulative total of the energy generated from these efforts to create business or strategic plans.
10 Critical Questions to Ask Before Hiring a Consultant
Talk to as many consultants as you can before hiring one. Even if you have one person or firm in mind, interview at least a few others as a sort of due diligence.
Want to Manage Your Time? Get Real!
You know the drill - the ridiculous deadlines, the relentless barrage of email, voicemail, phone calls, all those "got a minute" interruptions, the constant worrying that one of those many balls you're juggling is going to unexpectedly drop.When you're on total overload, all you want is relief - preferably the fast and easy kind.
Uncovering the Secrets to Effective Performance Management
In many ways there are no secrets to implementing effective performance management. Performance Management is a process and a process which if implemented effectively should ensure that both employees and managers remain both productive and motivated.
A Rare Leadership Skill: Dealing With People Who Want Out By Offering Crowns For Convoy
As a leader, you'll inevitably be faced with people wanting to leave your team or organization. Dealing with the challenge is critical for your leadership success.
Score the Rainbows Pot of Gold: Become the Boss That No One Wants to Leave
Leadership is lifting a person's vision to higher sights, the raising of a person's performance to a higher standard, the building of a personality beyond its normal limitations.Peter DruckerLadies and gentlemen, the captain has turned on the seat belt sign.