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Business risk models

One of the factors that determines the success of a company is its business model i.e. in which markets will the company offer its products and which part of the value chain will it cover? 

The same is true of business risk models. These models are used to describe the company's position in the risk markets i.e. in which risk markets does the company operate and which financial instruments involve assuming risk or placing risks back in the market? 

The business risk model also determines (to give just a few typical approaches) which risks are held, transformed or immediately placed back-to-back. 

Underlying the business risk model are the company's specific competencies in the risk markets. These correspond to its competitive advantages e.g. any advantages it may have in accessing risk markets or a specific product, management or transformation competence. 

Two key elements of the business risk model are risk governance (structures and procedures) and the underlying process model (function analysis, separation of duties, roles and responsibilities). This is often the crucial point that determines whether a risk management system is effective i.e. whether it identifies risks and prevents undesirable developments.

In many cases, business risk models emerge implicitly i.e. they are not explicitly developed and formulated as a result of management decisions. Some of the problems associated with the financial market crisis in 2008 can be traced back to failed (and above all uninformed) business risk models and ineffective risk management. 

As a specialist in financial and risk management consulting, d-fine can help companies to formulate, manage and control  their own business risk models.