Optimizing a company's risk costs

Usually companies do not have any exact figures concerning their risk costs. If we then take a look at obvious risk costs, they often amount to 10% of the overall costs. Reasonable risk management not only balances the risk/opportunity ratio, but also helps companies to save money. A cost optimization program evaluates risk costs which could potentially be saved.     

A company's major risk costs can be roughly assigned to one of four categories: costs of risk measures, risk capital costs, risk management costs and risk costs in the proper sense (costs arising as a consequence of risks).

We then consider both non-cash risk expenses as well as cash expenses in all of the above categories. Together with our clients we comprehensively assess current risk costs and define the status quo of risk costs in the company.  
 
In a second step, we define measures to reduce the company's risk costs in each of the categories. These measures are evaluated with a view to reducing the frequency of occurrence and/or the impact of risks and their cost/benefit ratio. Transparent risk management can, for example, result in a reduction of risk surcharges in the case of debt financing. We also evaluate existing measures as to their efficiency and to find out if they overlap. 

In our experience, potential savings amount to between 10 and 30%, reducing both non-cash and cash risk expenses.