Risks

On the risk side, you must deal with both revenue and price risk. These are different things with different risk management tools.

When risk management is not done well a business faces:

• Potential business failure.
• Failing to protect your total revenue stream.
• Receiving lower than necessary prices on commodities produced.
• Straining relationships with lenders.
• Facing lender decisions that can harm your business, as they protect their interests.

Opportunities

The basic idea is to reduce the chance of bad things happening and increase the chance of good things happening. On the opportunities side, if you do risk management well, you can reduce volatility and risk on the downside, but you can still maintain the opportunity to benefit on the upside.

This can help you:

• Protect your cash flow.
  
• Provide for flexibility in your decision making.
  
• Improve your lender relationships.
  
• Increase revenue.
  
• Enhance investment and growth opportunities.