Internal audits can boost small business risk management

Risk is a natural component of running any business. How effectively companies are able to minimize risk while still ensuring profitability is known as risk management. With the advent of the housing bubble, the 2008 financial collapse and the euro zone debt crisis, the demand for more stringent risk management policies is on the rise. Of course, there are many different kinds of risk - financial, operational, human capital, strategic and environmental, among others. But because of their size and limited resources, small businesses may be facing an increasingly adverse environment for risk management. In an interview with the Business Standard, management consultant Mritunjay Kapur recommends small businesses conduct effective internal audits to mitigate risks at each step. "An internal audit exercise can help SMEs implement strong internal controls which will help to reduce the risk of fraud and also provide various other benefits, right from raising funds and ensuring regulatory compliance, to supply chain integrity, business continuity and expenditure control," Kapur told the source. In regards to consumer credit risk management, financiers should leverage background checks and credit reports to gauge applicant qualifications.