One of the reasons it's important to manage corporate risks is because they affect both asset and liability management. In finance assignments, managers are required to organize both assets and liabilities into liability accounts to help the team keep track of how much money is owed or paid out in claims.
Another reason for corporate risk management is to understand risk and apply management techniques in asset management. Managers need to know how and when to capitalize on opportunities in order to avoid unnecessary risk.
A financial business is always prone to missteps, because of the interaction between what assets the company owns and how the assets are managed. For example, a company may pay for assets without charging rent for them.
When the company pays for things, but does not charge rent for them, then they are on a credit program called 'income financing' where they have a debt account but no cash flow. To prevent the company from going into a cash-flow crisis, this is one example of an asset management problem.
When a manager assigns an asset management team to oversee assets, they are generally paying a consulting firm a commission for working with that manager, even though the work they do is paid for by the company. This commission may end up being high and the risk managers in the management team may be overworked, which can cause the organization to pay far more in management fees than the actual expenses are.
The asset management team is also assigned to identify key assets of the company that have increased in value, and may be valued in other ways, such as the buyer's appreciation of the company's stock. This helps them develop a portfolio that will be invested carefully in the future, helping to keep the balance sheet current and ensure that they are not, themselves, over-extended.
The manager's help in finance assignment will include training to provide instruction on how to deal with various factors that impact the accounting part of the management of assets. This includes analyzing the company's debts, and identifying where cash is needed, and what areas to change so that cash is being invested in areas that will have a lasting effect on the company's financial health.
Certain companies are more concerned about earning the least amount of profit possible than others, so managers and their corporate finance advisors may end up focusing on these companies. The results of this focus can be better returns on assets, lower operating costs, and the ability to grow larger profits as well.
The role of the corporate finance staff is more involved than simply recording financial statements, or working with the corporate risk management team to find new markets. There are several tasks involved, including providing money management services, building partnerships with other companies, managing balance sheets, accounting, and helping managers create an appropriate strategy for achieving the goals of the organization.
In general, risk management teams and corporate finance teams are committed to finding ways to make the organization as a whole profitable. To that end, they are often heavily involved in training management and other employees on key business practices, some of which are applicable to both the new management teams and those already in place.
By understanding the management of assets and their allocation between risk and the potential for profit, a company can become more focused on delivering the core mission of the organization. Even a small increase in profit can significantly improve the bottom line of the organization, as the cost of doing business continues to rise in today's world.