One way the success of a business can be measured is through its performance on the financial markets, as the biggest and best companies in the world are those that do well there. In order to be a success, therefore, those working for a business should have a good understanding of financial markets.

It can also help in many other ways, whether you’re just formed a start-up company or are looking to improve an existing small or medium-sized business. Consider increasing your knowledge of the financial markets to help build a stable business in the following ways.

Improve Your Company

An increasing or decreasing share price is a good indication of a company’s current performance and can be used effectively to make informed business decisions. Knowing what affects the share price can help understand how businesses change their models to improve performance and profitability.

As it will be the executives and directors that hold a lot of the stocks and shares in a business, they will want it to be performing well to increase their profits and job security. Seeing a dip in form can kick-start some changes and quickly provide a positive turnaround. You can apply these same principles to your business.

Increase Knowledge of Risk

Being able to accurately assess when other companies in your sector are struggling on the financial markets is vital to awareness of current risks. If a lot of businesses in the same industry as yours are all performing poorly, then you should analyse this to see what the problem is.

While being aware of, managing and preventing such risks won’t directly help grow your company, it can stop it from being harmed. Plus, if many of your competitors are struggling and your business manages to significantly reduce such risks, then you should be able to capitalize on the situation.

Open Expansion Opportunities

Having a good knowledge of financial markets also offers some great opportunities for your business to expand, increasing profits and further establishing itself. Whether it’s purchasing bonds or trading forex, when you have the knowledge and ability, you can help your company succeed.

The best way to do this without introducing too much risk is to only put excess profits on the line, or money that isn’t being reinvested in the business. If there is nobody within your firm who feels confident enough to take on such a role, then hiring someone for the position is a good idea.

Safeguard Profits

As well as reducing risk, investing business profits in financial markets is a good way of safeguarding, and even increasing, profits. There are traditional safe-haven investments, such as gold, and currencies like the Japanese yen and Swiss franc, which should be considered first.

Still, a certain percentage of excess profits should be set aside for riskier investments that will have a chance of making greater profits if they come off. In order for any of these actions to be fortuitous, it is essential that you and others within your business become familiar with and knowledgeable about the financial markets.

Ben Barlow is a contributor to BusinessTown.com