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FOREX MERCHANT ACCOUNT Risk management - an introduction

Risk is an inherent factor in all activities and is a reality of life. With respect to Risk Management in business, the concern lies in its negative impact. It also deals with how the effect of risk can be minimized or eliminated. Businesses face risk from more than one quarter. Risk can basically be classified into two classes or categories. The first in be design and the other risk is by chance.

How to deal with risk – Whichever the class or category of risk, the foremost step that needs to be taken by companies in order to deal with risk is to have a mechanism in place that can forestall and foresee risk. After this, the next step is to take measures in order to minimise risk that cannot be eliminated altogether. The 3rd step is to either divert or transfer the risk. The 4th step is to go with the flow by accepting the remainder portion of risk, that is, to tolerate the risk and the pain that comes with it and then get back into business.

Following are a sequence of measures that could be taken to face risk and get the most suitable results. However, one must remember that a single, perfect way to deal with risk does not exist. It is mainly dependent on the type of risk, the surrounding circumstances as well as available resources at that moment.

-       Risk identification – All the activities have certain amount of risk associated with them. Hence, each activity needs to be broken into individual components after which the risks need to be identified for individual units as well as the whole entity.

Risk identification plays a vital role in managing risk. Efficient and thorough ground work always gives better end results. All the business activities need to be studied in and out. The associated risks and potential problems need to be mapped.

-       Risk elimination – After risk identification, the next thing to be done is to eliminate them. However, all the identified risk cannot be eliminated and not all have to be endured. Risks need to be eliminated to a certain viable and possible extent. Risks should be eliminated by combining a few strategies, based on the context, and the extent and nature of the risk faced.

-       Risk mitigation – All those risks which can’t be eliminated need to be reduced. The quantity of loss a business faces due to the occurrence of a risk is mainly dependent on the severity of this risk. Reduction of the severity of this risk will lead to the reduction of the potential funds lost.

-       Risk acceptance – When the risk can neither be eliminated nor reduced, it is best to accept it and channelize it in such a way that its impact becomes bearable.

-       Risk transfer or diversion – One can imaginatively transfer or divert the risk in some other entity n order to deal with risk.

Above all, it is necessary for an organisation to be prepared so that risk can be dealt with whenever it occurs. Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.