Setting up your startup or running your small or medium-sized enterprise (SME) comes with the excitement of developing your products and services as well as the challenge of planning your next move to grow the business.
Furthermore, as any entrepreneur knows, owning a business is a rewarding experience, with the potential for learning valuable lessons. To ensure long-term success, however, it’s important not only to focus on day-to-day operations but also to proactively identify and manage potential risks. Among these, financial risks can be navigated effectively, allowing your business to flourish and reach its full growth potential. Managing and mitigating these risks is key to securing a bright future for your business, and adopting a proactive approach, guided by a comprehensive strategy, will allow you to face the challenges head-on.
In this article, we will walk you through the importance of having a comprehensive financial risk management strategy to help you manage these risks and keep your business pushing forward in the face of trials and uncertainties.
Preserving Capital and Protecting Cash Flow
SMEs, owing to their very nature, operate with limited resources, often relying on a steady cash flow to keep the business afloat. Hence, financial losses, even in minor cases, can affect the capacity of the business to meet its operational expenses, pay its employees, and invest in its growth. Thus, having a financial risk management strategy can help prevent costly mistakes, especially during the early stages of doing business, and ensures that the cash flow is safe from risks such as late client payments, unexpected expenses, or market volatility.
As an entrepreneur, it’s essential to prioritize building an emergency fund or cash reserve for your business. Setting aside a portion of your profits, optimizing expenses, and improving cash flow can help create a financial cushion for unexpected challenges. In addition to these measures, there may be times when additional funding is needed to support growth or manage cash flow gaps. In such cases, exploring financing options like business loans can be a strategic way to augment your resources and strengthen your business. Maya Flexi Loan, for example, is a borrower-friendly loan option with flexible terms that gives small business owners like you access to up to PHP2M of extra capital that you can use instantly. This amount can be divided into separate loans to fit your exact needs.
At the same time, growing your savings is just as important for long-term financial stability. Keeping your business funds in a high-yield deposit account, like a Maya Business Deposit account, can help you reach your goal of building a financial cushion faster. With its 2.5% p.a. interest rate, your savings can grow more efficiently, giving your business added security and financial flexibility
Ensuring Business Continuity
Financial risks come in many different forms, like economic downturns, supplier disruptions, or natural disasters, all of which can negatively impact a business’s ability to operate. That said, a risk management strategy that includes contingency planning—such as getting insurance, building financial reserves, and planning for digital disruptions—is crucial for continuity and adaptability.
A business insurance policy provides security against specific risks like property damage, liability, and business interruption. Meanwhile, building and maintaining financial reserves provides assurance that your business can continue to function even through unforeseen events while contributing to the resilience of the enterprise. Additionally, in today's digital-first landscape, ensuring digital continuity—by safeguarding critical data and having backup systems in place—helps protect your business from cyber threats and operational disruptions, keeping your operations running smoothly no matter the circumstances.
Managing Market and Economic Volatility
It can be difficult to thrive in the country’s highly competitive markets, more so for SMEs that are especially vulnerable to changes in demand, varying interest rates, or currency fluctuations. Having a robust financial risk management plan protects your business from these perils through strategies like using a fixed-rate business loan in the Philippines to avoid interest rate spikes, or currency hedging for international transactions.
Supporting Growth and Enhancing Stakeholder Confidence
Sound financial risk management provides a stable financial environment for SMEs, enabling business owners to plan and execute growth strategies with confidence. Also, having well-defined risk management practices can help you secure financing since having these safeguards in place can make your business more attractive to lenders and investors. Additionally, a clear risk management strategy demonstrates proactive financial planning, helping you earn the trust of stakeholders who are interested in long-term business relationships with your company.
Compliance with Regulations
Legal and regulatory requirements apply to all businesses in the Philippines, big or small. And while compliance is basic business wisdom, it is also part of financial risk management. Having a financial risk management strategy involves compliance management as well, so it’s important for any entrepreneur to be informed about relevant regulations and laws that apply to their business to ensure compliance and reduce the risk of fines or legal complications that could affect financial stability.
Reducing Emotional and Operational Stress
It goes without saying that being an entrepreneur can be very stressful, with unanticipated changes and disruptions contributing to the troubles of managing the business daily and in the long term. Identifying potential threats that naturally come with running an SME and having a plan to readily address these can relieve you of unnecessary worry and help you focus on the future of your business instead. Having a plan gives you the time and motivation to work on growth and innovation rather than to fret on unexpected circumstances and crisis management.
Mitigate and Manage Financial Risks with an SME-Friendly Banking Partner
Beyond guarding against losses and ensuring stability, a financial risk management strategy empowers you to envision a positive future for your business and to take action toward achieving it. By proactively managing financial risks, you can position yourself and your business for long-term success in the ever-changing business landscape of the Philippines.
Start by signing up for Maya Business. Our business solutions will help you face the challenges of small business ownership and prepare you for financial risks.
Setting up a Maya Business account lets you open a Maya Business Deposit account and use it as your settlement account. With an industry-leading 2.5% per annum interest rate, you’ll earn PHP 25,000 in interest per year on a PHP 1 million deposit. Furthermore, you’ll be able to send money to your partners and suppliers for free via InstaPay and PESONet, letting you save more.
Signing up also qualifies you for a no-collateral Maya Flexi Loan offer of up to PHP 2 million in just 3 months, allowing you to have another funding source to protect against financial threats and further develop your business. Just use Maya as your primary processor for all wallet and card payments. The more you use our solutions, the better the loan offer will be.
Sign up for Maya Business today to enjoy the benefits of Maya Business solutions.
