Vinu: Manu, businesses often talk about financial risk. What are the key risks finance executives should focus on?

Manu: Three major ones, Vinu—credit risk, liquidity risk, and operational risk. Managing these well keeps the business stable.

Vinu: Let’s start with credit risk. What does it involve?

Manu: Credit risk is the risk of customers not paying on time or defaulting. For example, if receivables are ₹4 crore and even ₹80 lakh becomes doubtful, it directly hits profitability and cash flow.

Vinu: How can executives control this?

Manu: By setting credit limits, monitoring debtor days, and regularly reviewing ageing reports. Don’t let one customer exposure cross safe limits.

Vinu: What about liquidity risk?

Manu: Liquidity risk is the inability to meet short-term obligations. A company may have ₹2 crore profit, but if cash in hand is only ₹20 lakh against monthly commitments of ₹1 crore, it’s a serious issue.

Vinu: So this links directly to cash flow?

Manu: Exactly. Poor working capital management is the biggest cause of liquidity stress.

Vinu: And operational risk?

Manu: That comes from internal failures—process gaps, system errors, or poor controls. For instance, inventory mismanagement leading to ₹50 lakh loss or fraud in payments.

Vinu: How should finance teams monitor these risks regularly?

Manu: Track receivables and overdue accounts for credit risk

Maintain cash flow forecasts for liquidity risk

Strengthen internal controls and audits for operational risk

Vinu: What’s a common mistake businesses make?

Manu: Ignoring early warning signals. Delayed collections, frequent overdraft usage, or control lapses are often overlooked until they become major problems.

Manu: Risk management is not about avoiding risk—it’s about controlling and anticipating it.

Strong monitoring systems and timely action keep the business financially secure.

Manu: Absolutely. Sustainable growth comes from controlled risk, not just higher returns.

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