Precautions for distinguishing and preventing steel business risks

The operation of steel products involves large-scale and large-scale business operations, with high risk characteristics. In large-scale and large-scale business operations, it is of great significance to fully avoid operational risks and ensure safe operation.
1、 Identification of risk categories and risk factors
According to modern marketing theory and combined with the marketing practice of steel products, the operational risks of steel products are generally divided into two categories: asset risk and market risk.
Asset risk refers to the risk of asset losses that may occur in business operations, such as bad debts, bad debt losses, etc. Market risk refers to the risk of losing sales prospects, losing market opportunities, and lowering sales prices due to changes in market conditions and prices. Asset risk and market risk have different natures and often coexist in business operations.
2. Identify the main risk factors through systematic analysis of various links and aspects of steel product management business.
The main risk factors related to market risk include market changes, sales direction and contract volume, sales channel optimization, sales network stability, market price stability, product inventory, etc. The main risk factors related to asset risk include marketing policies and plans, payment security, product security, safe operation of branch offices, and human management.
2、 Risk factors and avoidance measures related to market risks
Market risk mainly comes from changes in the market and fluctuations in market prices. It may be manifested as a sharp change in market demand causing the company’s products to lose sales direction, or as a significant drop in market prices causing the company to lose market opportunities and suffer price reduction losses.
The risk avoidance measures taken for various market risk factors generally include strengthening prediction and response to market changes, striving to maintain sufficient contract volume, improving the stability of sales channels and networks, striving to exert influence on market prices, and reducing inventory.
1. Pay close attention to the market, actively predict and respond to market developments and changes.
According to the needs of business decision-making, the market information that needs to be paid attention to generally includes three aspects: firstly, the macro market situation and the development and changes of market demand. The macro changes in the market will affect and determine the medium to long-term changes in the market supply and demand relationship, as well as the overall trend of market prices. The second is the changes in demand among direct users, downstream users, and the industry. The changes in the needs of direct and downstream users will have a direct impact on orders and contracts. The third is to pay attention to changes in the distribution process.
By paying attention to and studying the market, making predictions in advance of market development and changes, researching and formulating response measures, and making timely and correct business decisions, we can effectively avoid the business risks brought about by market development and changes.
2. Strive to maintain smooth sales channels and sufficient contract volume, and improve the ability to resist market changes.
Maintaining smooth sales channels and sufficient contract volume is an important means to combat market changes and avoid market risks. Therefore, it is necessary to vigorously strengthen market development and sales network construction, and pay attention to selecting and developing diversified and multi regional sales channels. Strive to provide sufficient contracts and orders for enterprises, and strive to always maintain an order quantity slightly greater than the production and supply capacity. When there are changes in the needs of local markets or some users, we strive to maintain the sales direction of our products through order adjustments within the sales network, and achieve the goal of “not bright in the east but bright in the west”.
3. Optimize sales channels by vigorously developing direct supply sales.
The consumer demand of direct users for products determines that they are more able to develop into loyal users than distributors. Vigorously developing direct users and establishing a stable market supply and demand relationship with them can play an important role in stabilizing sales channels and reducing market risks. Especially when the market fluctuates and distributors stop ordering, it will highlight the advantage of direct users, enabling enterprises to effectively avoid market risks.
4. Strengthen the management of distributors and improve the stability of the sales network.
One is to develop and manage distributors based on the principle of “developing the number of distributors and controlling the scale of distributors”, not developing super large customers, and preventing situations where super large customers influence the market situation and prices.
The second is to continuously strengthen communication with dealers through various forms such as holding symposiums and visits, in order to maximize the impact and constraints on their business activities.
5. By strengthening communication and coordination with the industry, we strive to leverage our influence on market prices and maintain market price stability.
The same industry has a desire to stabilize the market situation and market prices, and we should pay attention to the power of joint industries to influence market prices. In terms of price adjustment, important partners in the industry should adhere to communicating information, coordinating actions, and jointly maintaining market order.
6. Strengthen the management of sales resources and delivery, striving to maintain low inventory.
Excessive product inventory not only requires a significant amount of working capital, but also brings significant market risks. When market demand suddenly decreases and market prices plummet, it can cause significant economic losses. With low inventory and no backlog, there is greater room for maneuver in responding to market changes. When there is a sudden change in the market. We can first respond to the decrease in market demand by appropriately increasing inventory, thereby stabilizing market prices, stabilizing market supply and demand, and reducing price reduction losses.
3、 Risk factors and avoidance measures related to asset risks
To avoid asset risks, corresponding measures are generally taken to ensure the safety of marketing policies and plans, strengthen contract management, ensure the safe recovery of payment, ensure the safety of product logistics and delivery, strictly operate branches in accordance with the law, and strictly prevent personnel violations and duty crimes.
1. Strictly implement the marketing policy of “receiving payment first and shipping later”.
In the historical debt of business operations, bad debts and losses caused by credit sales account for the majority of asset losses. Sales business with credit nature should be treated with caution and strictly controlled, strictly following the principle of “preferably reducing prices, never selling on credit”.
For those that must be sold on credit due to supply and demand or market demand, in-depth investigation and research should be conducted on the demand side to determine whether credit sales can be carried out, and credit sales should not be easily opened.
2. Strengthen contract management to ensure the safety of marketing policies and plans.
Cooperation agreements and supply contracts are legally binding documents that define the rights and obligations of both parties. For cooperation agreements, unified control should be carried out in accordance with the principle of “strict risk control and standardized business operations”, and various non-standard and imprecise operations should be strictly prevented and corrected. For supply contracts, it is necessary to strive for standardized form, rigorous content, and complete terms, fully considering the interests of both supply and demand parties and the convenience and standardization of business operations. When signing a contract, attention should be paid to confirming the personnel signing the contract and the seal of the buyer. For important contracts with a long execution period, attention should be paid to the agreed validity period and termination terms, and attention should be paid to the handling methods and jurisdiction issues of objections in the contract.
3. Strictly operate the collection business to ensure the safety of collection.
In this regard, it is necessary to strictly implement the financial system of receiving payments according to the notification of the sales business department. The sales department shall promptly notify the finance department to collect orders and prepare to sign contracts. If there is no notification from the sales department, payment shall not be made. This can effectively avoid the occurrence of user objections caused by the inability to deliver the goods after payment. At the same time, the finance department also needs to implement a strict payment verification system for bill receipts to strictly prevent the occurrence of bill fraud.
4. Control operational risks during product delivery.
Product delivery is a key link in achieving asset transfer in business operations, and it is the last opportunity for sellers to take the initiative in assets. Strict verification of user payment systems should be implemented. All delivery notices must first verify the payment to account status. If the payment to account is correct, the financial receipt seal must be stamped on the delivery notice. Only the delivery notice stamped with the financial receipt seal can enter the production scheduling and delivery process.
5. Strengthen the management of branch offices to ensure their standardized operation and safe operation.
Due to the fact that various branches of steel product management operate in different business environments, it is necessary to strengthen the management of these branches from the perspective of standardized operations, and resolutely avoid the risk of asset losses that may be caused by disciplinary action, punishment, or confiscation by relevant administrative authorities such as public security, industry and commerce, and tax authorities due to non-standard operations.
6. Strengthen the management of individuals and prevent violations of rules and regulations as well as job related crimes.