Risk Management For Rising Inflation
The world was rocked by a coronavirus and as a global population, we braced ourselves for a new normal. However, very few people expected the new normal of sky-high inflation not seen since the 1970s. The consequences of this inflation have hit every sector, and insurance is no different. But what can a risk management strategy do to curb the risks of inflation?
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Risk management strategy
The benefit of risk management is that it will allow you to plan for any contingency that rising inflation may have on your business by giving you an easy to follow the process for all eventualities. From keeping an eye on what is being spent to reducing expenses, giving a clear understanding of what your business may have to endure will make the immediate future seem more palatable.
Visible spending
Every company needs to spend money to make money, or so the old saying goes. And this isn’t going to stop because of inflation. In fact, you will most likely see yourself spending more money on everything from energy bills to production supplies. Making sure that this expenditure is fully visible will help your business fully understand where the money is spent and who it is being spent by. Being able to establish an account of spending via cost category, business needs and function will allow you to make decisions on what and where you need to spend and increase accountability.
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Understand your spending
Unfortunately during economic turmoil, difficult decisions need to be made about what to spend money on. This is where you should draw up a program in which you can easily differentiate between strategic spending and non-strategic spending. This allows businesses to see where they should be spending and investing in order to move forward. Once the economy settles all nonstrategic spending can begin again, but during times of uncertainty, difficult decisions have to be made in order to keep businesses viable. Trimming costs will help do that.
In order to prioritise, drawing up a list of expenditures in relation to return on investment will help plan. This links back to visibility.
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Eliminate cost
In every business, there is work that doesn’t bring as much value to the table as other sectors. It may seem difficult, but now is the time to sit down and see what these areas are, and if possible reduce or cut them. In scrutinising what activities are undertaken and how they are undertaken will go a long way to ensuring that unnecessary work isn’t being done. Streamlining your business to align with your goals and needs will see you through this economic difficulty far better than trying to appease workers and continuing on in the same direction.
Business benefits
It’s not all doom and gloom. There can be ways in which your business will benefit from inflation. Conducting an in-depth competitor analysis, and paying particular attention to price points will give you pricing power. Making your product or service the most affordable on the market will drive more and more consumers to you, giving your business a big chunk of the profits. Of course, this can only happen if you are offering high-quality services and products.
Inflation is rising and is causing issues for some of the lower earners in our country, but it is not only those households that have to be aware of the changes that high inflation brings. Businesses are also under threat, but if you plan to mitigate the risk and understand that difficult decisions may have to be made, then you can create a strategy that will help you shoulder the burden and keep your business healthy.
