By David Puckett, Implementation Consultant, InterDyn – Artis

In today’s tough economy, effectively managing the many aspects of risk to your company has never been more important. Each and every day, CEOs, CFOs and line managers are faced with ever increasing and costly risks that can suddenly and completely wipe out years of work and dedication.

There are many approaches and tools for managing risk. Microsoft Dynamics GP can be one of the most effective tools for gathering and accessing the data you need to efficiently manage and mitigate your risk factors.

Types of Risk:

Risk is generally categorized into five main groups:

• Business risks or those associated with an organization’s particular market or industry.
• Market risks or those associated with changes in market conditions (i.e. prices, interest rates or currency rates)
• Credit risks or those associated with the potential for not receiving payments owed by creditors.
• Operational risks or those associated with internal system failures because of mechanical problems (e.g., machines malfunctioning) or human errors (e.g., poor allocation of resources).
• Legal risks or those associated with the possibility of other parties not meeting their contractual obligations.

In addition, Environmental risks constitute a significant and growing area of risk management. Reports indicate the number and intensity of natural disasters are increasing.  For example, the periodical Risk Management reported that there were about five times as many natural disasters in the 1990s as in the 1960s.

(Heil, Karl, “Risk Management: The Evolution of Risk Management”, www.ReferenceforBusiness.com.)

As an accounting and financial software package, Microsoft Dynamics GP can be a valuable tool in the assessment and management of certain business, market and credit risks as relating to your industry or market.  Additional functionality such as Distribution can reduce risks due to capital tied up in resources such as inventory, raw materials and unsold goods by facilitating the efficient tracking of critical stock levels against forecasted sales.

Through the use of the many data reporting tools available to Microsoft Dynamics GP users, such as FRx, Report Writer, SQL Reporting Services, along with database-accessible tools such as Crystal Reports, risk managers can assess the necessary information they need in the form of analysis data, ratio analysis and credit information. This information can be presented in the form of reports, graphical representations, dashboards and spreadsheets.

Some of the more common financial risk ratios that can be generated with Microsoft Dynamics GP include:

• Liquidity ratios – Current ratio, Quick ratio, Cash ratio, Cash Conversion Cycle
• Profitability ratios – Profit Margin, Return on Assets, Return on Equity, Return on Capital Employed
• Debt – Debt ratio, Debt to Equity ratio, Cash Flow to Debt ratio
• Cash Flow- Operating Cash Flow/Sales ratio, Cash Flow Coverage, Free Cash Flow
• Operations – Fixed Asset Turnover, Sales/Revenue per Employee, Operating Cycle

Secondarily, optional modules like Human Resources can help assess and mitigate some Operational risks from employees such as Drug Testing results and test tracking, tracking company-issued property, tracking required safety testing and certifications, and I-9 immigration document tracking, to name a few.

Additionally, Currency risk can be managed for those engaged in international markets through the use of Microsoft Dynamics GP Multicurrency functionality by tracking exchange rate fluctuations and its impact on revenues and profits in foreign markets.

To learn more about the power of Microsoft Dynamics GP and how it can help in your efforts to assess and monitor your risks, contact your InterDyn – Artis, a North Carolina Microsoft Dynamics GP Certified Value-added Reseller and get your risk management program off to a great start today!

By InterDyn - Artis – North Carolina Microsoft Dynamics GP Partner.