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| Free financial risk assessment template in Excel |
Free financial risk assessment template in Excel
A financial risk assessment template can help you identify the risk level specific to your business, prioritize those risks, develop ways to avoid them and outline steps to manage them should they happen. A financial risk assessment also helps you understand your appetite for risk.
To develop financial risk mitigation solutions, you will need to identify and analyze financial risks, then create a proactive financial risk management plan.
Identify the Risk
By identifying financial risks, you can take a proactive stance in protecting your business’s cash flow and improving performance. To identify financial risk, start by carefully reviewing your corporate balance sheet or statement of financial position. You will want to understand what your main sources of revenue are and how customer credit terms affect this revenue.
Analyze the Risk
Once you have identified financial risk, you can begin analyzing each risk to determine the likelihood of the risk occurring and its consequences.
First, check how consistent you are in producing profit. A healthy profit margin allows you to absorb any hits to your cash flow that you may discover in your analysis.
Then, analyze each financial risk by asking these questions:
- What is the likelihood of this risk occurring?
- If this risk occurs, how much of an impact would it have on the business?
- If this risk impacts the business, what steps can the business take to recover?
- What can the business do to prevent this risk or prepare in advance of the risk occurring?
By analyzing the risks, you can clearly see which are priorities to address, and better understand what needs to be outlined in your risk mitigation plan. Depending on your business, you should identify and analyze risks quarterly, semi-annually or annually.
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