Financial Strategy Essay Example | Topics and Well Written Essays - 1500 words - 1

Financial Strategy - Essay Example However, it should not be forgotten that today’s business environment is highly competitive, unpredictable, unstructured and complex; therefore, only fittest and stronger firms having proactive approach could survive in contemporary business outlook. Proactive approach is actually about sensing problems before hand and devising alternate solutions / strategies to avert damage in upcoming future. In addition, the proactive approach also refers to setting trends in the industry or marketplace through product development, quality maintenance, innovation, branding and differentiation strategies. It should be highlighted that business is all about taking risks. An entrepreneur identifies the gaps and opportunities in the market after which risks one’s resources to capitalise them for profit generation and monetary gains. Risks are identified, evaluated and measured through quantitative tools and statistical methods so that the strategic planners would gain a near-to-accurate insight over the potential scope in any specific industry (Lynch, 2008); (Emmison & Smith, 2002); (Johnson & Scholes, 2008). In other words, if all perceived risks are not evaluated and measured correctly then the probability of business failure and financial losses will be higher. For instance, if the risks associated with any business are high then investors also expect high rate of return because of effort and risk involved. This means that it is difficult to enter in a risky field and industries (more barriers) because of greater probability of losses and low chance of survival; however, the success of an entrepreneur in a riskier venture would entitle him / her to high profit margins and financial benefits (Beasley et al, 2005). As mentioned before that the organisations are operational in a highly complex and uncertain business environment; therefore, there is immense need of risk consciousness because even small mistakes and blunders may lead to adverse consequences. I would , thus, agree with this statement that a firm’s risk consciousness governs the underlying strategies that are employed by the enterprise. Risk consciousness, in simple words, refers to paying serious attention to identify any small and large risks associated in setting up a new business, expanding an existing firm (in either domestic or foreign markets), introducing a new product, innovating an existing product range, acquiring diversified businesses, shifting from debt to equity financing and others etc (Neale & Haslam, 1994). Nonetheless, risk consciousness takes place when top management / policy – makers implement measures that would help instilling risk management culture within a corporate setting (Glen, 2007). In fact, the more prudent, judicious, efficient and calculated the strategic planners are in determining, assessing, measuring and communicating risks with their subordinates and organizational members, the more effectively risk management culture and risk consciousness could be developed and implemented with the support of chief risk officers (Lam, 2000); (Colquitt et al, 1999) (Bender & Ward, 2002). In addition, the firms that are not risk conscious face situations in which problems have to be tackled immediately when they occur due to absence of proactive risk management approach and contingency plans. Obviously, this leads to nothing but inefficiencies and losses in the short run that could have been avoided