An entrepreneur should have information on past development, current processes, the assumed future development and key moments. The source of various findings may be information on turnover, stock levels, development of receivables and liabilities, and others.
There might be a number of risk situations and crises in a company. The reason might be the wrong business activity, overvaluation of goals, etc. Other frequent problems include undercapitalized business when the entrepreneur or the company does not have enough equity, success, fraud, embezzlement, bribery and management failure.
It is important to respect legislative requirements, for instance those related to occupational safety or production quality. Another important point is meeting the tax duties to avoid large penalties. Respecting contractual obligations is equally important.
Protection against risks
- Defining the risk boundaries (the best and worst situations).
- Division of risk.
- Diversification of risk (have more suppliers).
- Transfer of risk to entities (responsibility insurance, property insurance).
- Creation of reserves.
It is recommended to continually monitor the financial health of the company through financial analysis. A financial analysis compares values in the individual years and compares them to similar companies in the area. The analysis uses several indicators – indicators of profitability, liquidity (or the ability to repay liabilities), activity (turnover) and indebtedness.