Risk is something that
nobody expected but we have to accept to live together with it. Identifying risks and creating solutions
to prevent it and also minimize losses when it happens are what businesses should
do. That is positive solution instead of accepting risks.
So what “risk” is? There
are many definitions of risk, in which there are two main points. First, risks
are unexpected events. Second, when risk occurs, it causes losses to people and
society. The business operations of enterprises are very diverse. In theory,
such operations are always come with risk. Instead of statistic the risks (very difficult), we
should approach the issue from the step of identification the causes of risk.
It will help businesses to have better prevention against the risk. Here are
some common causes of risks that businesses often encounter.
There are 8 main causes of
risk. First, that is the natural environment, such as storm, flood, drought,
earthquake, volcano, tsunami, sea level rising and the earth “hot” up… These
risks often have some common characteristics: the ability to forecast and
predict is low, happen suddenly, cause damages on a massive scale, not just for
one region, one industry, one community but for the whole economy, a number of
countries or the whole world. The prediction and forecast of these natural
disasters are difficult but they active as a rule. Hence, enterprises can
proactively prevent or choose appropriate solutions.
The second risk is the
risks from social environment, social structure and population. That is the
change of value, standard, human behavior, the scale of values in society and
the social characteristics… They are source of risk for commercial operations
and investment activities
of enterprises. However, a society that encourages nurturing the creative
values and the inspiration investment would certainly the good protective
shield for businesses.
Thirdly, there are risks
come from the environment where the cultural background is low… A society where
there is low literacy, lack of cultural norms, morality is not enhanced then
how well the law will be enforce? Once the laws are not enforced effectively, a
thousand risks may occur. There will be a stunning political rights, the rising
of kinds of crimes such as theft, looting, rioting, economic fraud underground, reneged contract,
counterfeiting, piracy, inciting religion, ethnicity and hatred… As a result,
the kind of snatching, fraud and deceptive business will dominate.
Fourth are the risks
from political environment, where lack of institutions to protect the freedom,
democracy, property rights of people in general and businesses in particular.
Political environment includes the stability in politics, security and safety
for enterprises and people. A country that usually has national policy changes,
coups, wars, riots, ethnic and religious conflicts, intervention in markets
that lack of standards, policies were dominated by the interest groups,
discrimination, corruption… are causing serious risks to businesses, causing them to lack of
business confidence, lose investment momentum and can harm the economy and
society.
Fifth are the risks come
from economic environment. A strong economy is an economy that has high
resistance with the ability to resolve the crisis in the best way in the
direction of transparency, low cost, high sustainability. An economic
environment where there are often crisis, inflation, erratic pricing, instable
supply and demand, exchange rate changes frequently, shortage of goods and
services, uncontrollable monopoly, fair competition is only on paper… along
with the lack of technocratic skills shall be considered to be major risks for enterprises. Furthermore, on the
other hand, the challenges come from an economy with high competitiveness, the
drastic changes of technical science and information technology would also be
the risk for enterprises that lack of the ability to adapt to changes.
Sixth are the risks that
resulting from the regulatory environment that lack of transparency in three
fields of legislative, executive and judicial. This is also the danger of
healthy businesses. A system of legal documents should be issued with the
effective participation of the business community, according to the criteria of
sustainable, friendly, fair and easy to apply. An effective law enforcement
system should be operated under the motto support, promote and facilitate business. A system of reliable
justice, respect for justice and ensuring effective law enforcement with a
society that respect for ethic and law would be an ideal environment to
encourage investment and development of business. Conversely, a businessenvironment where the law is
inconsistent, contradictory, overlapping, change suddenly and shady, law
enforcement lacks transparency, openness and efficiency, the application of the
law lacks fairness, property ownership right and the right to protect the
contract are not only abused but also the cost is too high… are sources of
risk, causing severe damage to the business.
Seventh is the risk
coming from business partners. They can be investors, joint ventures,
cooperation or customers of the business. Have you ever questioning that where
do they come from and are they reliable in terms of skills, experience,
financial strength, legal and corporate governance. When establishing a
relationship in business, both parties should understand and trust each other
before coming to the steps of negotiating, signing and implementing contracts.
Regarding business contract, it should be made very carefully because each
paragraph stalking the risks that businesses need to take into consideration
such as terms, payment, tax, limitation of liability, termination of the
contract ahead of time and contract dispute resolution…Hence, the contract
should be made carefully by a professional unit.
Eighth is the risk
coming from the enterprise itself such as business attitudes towards risk,
mistakes in business strategy and enterprise management, the weakness of the
managers and employees, lack of ethics and business culture, lack of
motivation, lack of internal unity…The most important thing is to regularly
inspect and test the control systems of corporate is effective or not.
Corporate governance is the whole system of rules and regulations. Good
corporate governance will help the strategic decisions of the enterprise to be
issued in the most enlightened and effective way, along with the best
elimination of risk. Good corporate governance ensures utilizing all resources
of business.
Before conducting
business operations, businesses have to conduct risk analysis from at least 8
reasons above, then who dares to ensure that doing business is easy.
ANT Consulting is here
to assist you from the outset; providing corporate intelligence, risk advisory, management
consulting services that assist market entrance, and ensure efficient business
start-up operation.
We strive to save your
cost by guiding you towards economical solutions that comply with local
legislation and procedures. We support you through early logistic solutions and
carry you through as your business grows. We aim to bridge the gap
between international best practices and local cultures and assist foreign
companies and organizations entering Vietnam market to overcome commercial and
regulatory issues.
We could be reached at email: ant@antconsult.vn or
tel: +848 3520 2779 . To learn more about us, please visit
www.antconsult.vn
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