Operational Risk On Managing Investment Checklist
When it comes to managing investment, operation risk management is an integral part of any investment company. Based on how the operational risk is managed, the company is able to do away with inefficient practices and also risky procedures, so that the investor gains maximum benefits on his or her investment without facing any adverse consequences. |
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When a company, especially a well known one, begins to have liabilities that are worrying, they tend to shake the confidence of the investors and the share prices of the company stock start falling. To ensure that the best practices are maintained within a volatile investment environment and during downturns, companies have to adopt techniques of managing operational risk on managing investment.
Usually when the markets are performing well, operational risks are invariably ignored. There are many operational risks when managing investments that need to taken into consideration. Some of the operational risks while managing investments are as follows:
- Fraud -- This can be internal or external in nature. For instance, internally fraud can be committed by misappropriation, evading taxes, bribery etc. While externally fraud can be committed by a third part when the company's database is hacked or someone else commits forgery.
- Employment procedures -- There should be no discrimination in the company when it comes to hiring, promoting or compensating employees. This discrimination can be a risk to the company. Also, the health and safety of employees should be paramount.
- Business practices -- The company should not allow its employees to manipulate the market, indulge in improper trading practices or cooking up the accounts.
- Disasters and disruption -- The company should be prepared for disruption in utility services, failure of software and/or hardware.
- Damage to physical assets of the company -- There is risk of natural disasters and or vandalism damaging the assets owned by the company.
- Business processes -- The company should be aware of errors in their data entry procedures and accounting system. It should also protect itself against the loss of a client's assets while having all its reporting procedures in place.
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When a company has shareholders, it main aim is to increase the wealth of the shareholders through proper investments. However, when it comes to investing, the company has to do risk analysis on any investment decision.