Risk management

Risk Management in relation to Credit Control is the "risk" versus the "reward" equation in making the sale and the risk of not being paid.
If you are selling to a Government Department with an official purchase order signed by the appropriate person the "risk" in this transaction is very low. The chance of you not being paid is almost negligible.   However,  if you were selling goods or services to someone like Mr A O'Neil or one of his companies (prior to his bankruptcy) the risk was extremely high.

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Risk Management weighs up the "risk" of selling to a particular individual or company versus the "reward" (the margin) that you would make on the transaction.  Many firms have a standard price for a group of customers (usually based on sales) and there is no or little risk management assessment of the individual customer.

For example:  If a sale to Mr A O'Neil was grossing a 20% margin, the risk of doing business with this customer was just not worth making the sale.  If the gross margin was 100% the risk assessment was still very high but the reward (margin) much greater, making this a much more attractive proposal.

In business we need more risk assessment of individual customers and a pricing structure that reflects the risk of that particular customer.  Not one based on the volume/dollar value of sales.