businessrisks-101011205120-phpapp02

7/27/2019 businessrisks-101011205120-phpapp02

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Business Risks

How much of a risk are you willing to take?

Going out on a limb.


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Business Risks Terms

Risk

The possibility of a financial loss.

Risk management

The process of managing a businesss

exposure to risk in order to achieve

business objectives. Business r isk

The possibility of business failure or loss.


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Types of Risks Specu lat ive risk

Risking loss to make a profit.

Possibility of seeing a loss, no change, or

actually making profit

Examples include buying new machinery

constructing new buildings

Pure r isk

The possibility of loss to a business without anypossibility of gain

Economic risks

Natural risks

Human risks


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Economic RisksRisks that result from changes in overall

business conditions. Examples of economicrisks include:

CompetitionMore businesses that would

compete with your business open in the area. Changing consumer lifestylesThe lifestyle

of the consumers in your area changes due to

new industry opening or closing, new

businesses, etc.

Population changesPotential customers

moving out due to economic downfall

or moving in due to new economic opportunities


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Econom ic Riskscont inued

Limited usefulness of products - newproducts introduce replace your products orthe needs of customers needs change

Inflationthe availability of cash tocustomers will reflect in the buying patterns.

Product obsolescenceproducts you

offer to the public is not longer needed orout-of-date.


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Econom ic Riskscont inued

Government regulationnewregulations can change the status ofyour products. Products can be

recalled because of safety measuressuch as baby products or medicines.

Recession Just as with inflation the

availability of cash affect customerpurchases.


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Natural Risks

Risks resulting from natural causes.Examples include: Floods

Earthquakes

Tornadoes

Hurricanes

Fires

Lightening

Droughts

Unexpected changes in normal weather

conditions


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Managing Business Risks
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Ways to Reduce Risk Design work areas to reduce the chance

of accident or fire.

Educate employees on safe use ofequipment.

Check and service safety equipment ona regular basis.

Stress the limits of your companysproducts.

Provide customers with instructions on theproper and safe use of products, as well aswarnings about possible hazards.
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Ways to Reduce Risk Shoplifting is a form of external theft that

involves taking items from a businesswithout paying for them.

Ways to reduce shoplifting. Educate employees on shoplifting prevention

guidelines.

Provide effective store layouts with adequatelighting and orderly displays.

Store expensive items in locked display cases ortag expensive merchandise with electronicdevices.

Employ the use of two-way mirrors, securitypersonnel, or closed circuit television.
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Ways to Reduce Risk Control employee theft.

Install closed-circuit television systems and

point-of-sale terminals that generate

computerized reports.

Provide company policies that make

employees aware of expectations.

Utilize pre-employment testing to detect

employee attitudes about honesty.
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Ways to Reduce Risk Implement ways to reduce robbery.

Robbery involves the taking of propertyby violence or threat.

Limit the amount of money kept on hand.

Use a safe. Handle bank deposits discreetly.

Install surveillance cameras to help identifyrobbers.

Schedule employees so that no one is alone in a

business at any time. Hire security guards.

Provide adequate lighting inside and outside ofthe building.

Make sure that doors are locked and alarms are

set at night.


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Ways to Reduce Risk

Purchase property insurance to cover: the loss of physical property such as cash,

inventory, vehicles, buildings.

real property such as buildings, land, and fixtures. personal property such as vehicles, clothing,

furniture, jewelry.

Purchase business interruption insuranceto make up for:

lost income if a business is shut down forrepairs or rebuilding.

Allows a business owner to continue to pay rent,salaries, and other key payments.


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Ways to Transfer Risk

Purchase casualty insurance to: Protects a business from lawsuits.

Pays the claim if a person is injured on yourbusiness premises or if a worker causes

damage Types of casualty insurance Errors-and-omissions insurance: Protects businesses

from lawsuits resulting from mistakes in advertising.

Product liability insurance: Protects manufacturers

from claims for injuries that result from using theirproducts.

Fidelity bonds: Protect companies from employeetheft.

Performance bonds: Protect a business if work is notfinished on time or as agreed.


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Purchase life insurance to: Pay a business in the event of the insured

persons death.

Covers owner(s) and key managementemployees


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Pay Workers Compensation

A government-regulated program which provides

medical benefits and income to employees who

are injured on the job.

Compensation is dependent on the wages or

salary of the employee, the seriousness of the

injury, and whether the injury is permanent or

not.

Frees businesses from the threat of employee

lawsuits


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Business Risk Retention

Businesses is self-insurance againstbusiness loss.

If a business cannot or does not provide for

ways to transfer risk using one of the

described means, the business should setaside money each month to help cover the

costs should a loss occur.

Planning for the unexpected, can save a

business.


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Emergency Planning

Businesses must:

create emergency response plans to help

handle emergency situations moresmoothly.

have procedures in place before a crisis

occurs.

Documents

businessrisks-101011205120-phpapp02