CHAPTER 19 6/4/2018 Do Now What is risk? What does Harbor Yard or Bluefish Stadium do to reduces the risk of injury to an attendee during a concert or game? Everyone knows the strategy and what needs to be done in case of an emergency. Well marked paths for students to follow. What is risk? Chapter 2

Sports and Entertainment Means Business 2 Sports and Entertainment Means Business 2.1 Sports and Entertainment Economics 2.2 Risk Management

Lesson 2.2 Risk Management CHAPTER 19 6/4/2018 Lesson 2.2 Risk Management Goals Define risk and describe the categories and classifications of risk. Name and describe four strategies for risk management. Chapter 2

CHAPTER 19 6/4/2018 RISKING IT ALL risk the possibility of financial gain or loss or personal injury What are some risks you take on a daily basis? Chapter 2

Three Categories of Risk CHAPTER 19 6/4/2018 Three Categories of Risk Natural risk occurs from unavoidable weather conditions Human risk dishonest customers and employees inadequately trained employees Economic risk occurs due to changes in the economy Examples: 1. storms: Hurricane Katrina, 2. theft: Cheating on a test or stealing from your employer, 3. business: Banking crisis that turned into the housing crisis Each of these can be further classified into the following three. **Pass out Categories of Risk WS** Chapter 2

Three Additional Classification of Risk CHAPTER 19 6/4/2018 Three Additional Classification of Risk gain or loss risk speculative risk either a gain or loss could result pure risk a chance of an event occurring that could only result in a loss Examples: Speculative: investing in the start up of a sports team – the team will either be successful and make the investor a lot of money or not enough fans the team will no longer exist. Pure: your house will be destroyed due to natural disaster – unlikely there is any potential benefit from this risk. Chapter 2

Three Additional Classification of Risk CHAPTER 19 6/4/2018 Three Additional Classification of Risk controllable or uncontrollable risk controllable risk if a loss can be prevented or the likelihood of its occurrence reduced uncontrollable risk nothing can be done to prevent the risk Examples: Controllable: Proper fire exits & strategies in this school. Uncontrollable: A hurricane demolishing the school. Chapter 2

Three Additional Classification of Risk CHAPTER 19 6/4/2018 Three Additional Classification of Risk Insurable or Uninsurable risk insurable risk a pure risk for which the chances of loss are predictable and the amount of the loss can be estimated uninsurable risk the chance that a dollar loss could occur the amount of the loss cannot be estimated Examples: Insurable: Car accidents. Uninsurable: Loss of revenue for a sports team whose ticket sales drop. Chapter 2

CHAPTER 19 6/4/2018 What are four steps a sports venue could take to avoid risk of injury to fans attending games? Well-lit, Fire exits, Security personnel, EE’s trained in emergency procedures, Video surveillance, Controlled access to public and private areas Chapter 2

MANAGING RISK risk management CHAPTER 19 6/4/2018 MANAGING RISK risk management preventing, reducing, or lessening the negative impacts of risk by using the strategies of risk avoidance, risk insurance, risk transfer, and/or risk retention Managing risk = taking action to prevent, reduce, or lesson the negative impacts of risk Chapter 2

Strategies to Manage Risk CHAPTER 19 6/4/2018 Strategies to Manage Risk Risk Avoidance – precautions to avoid risky situations Risk Insurance – buy insurance for predictable risk Risk Transfer – put the liability on another company or even the customer Risk Retention – retain money to cover the cost of a given risk Examples = Avoidance – security cameras, Insurance – fire insurance, Transfer – signing a contract before going bungee jumping, Retention – having a large deductible on insurance policy. Chapter 2

Lesson 2.1 Sports and Entertainment Economics Goals Define profit and explain the profit motive. Describe types of economic utility. Chapter 2

THE PROFIT MAKERS profit profit motive CHAPTER 19 THE PROFIT MAKERS 6/4/2018 profit the amount of money remaining from revenues after all expenses are paid revenue the money a business receives from the sales of goods and services profit motive making decisions to use resources in ways that result in the greatest profit Profit is the motive for taking risks needed to start and operate a business. Chapter 2

Cultural Opportunities for Profits CHAPTER 19 6/4/2018 Cultural Opportunities for Profits Worldwide distribution revenue is critical for movie profits. China has a tremendous movie market. The government censors movies for content Pirated movies diminish theater sales Movie profits – international ticket sales increases revenue by 50% to 100% over domestic ticket sales = INTERNATIONAL MARKET IS HUGE Marketers must understand the markets in which sales occur. Chapter 2

ECONOMICS economics the study of how goods and services are produced, distributed, and consumed Chapter 2

Sports and entertainment marketers are focused on microeconomics. macroeconomics the study of the economics of the entire society microeconomics the study of the relationships between individual consumers and producers Sports and entertainment marketers are focused on microeconomics. relationships with consumers Chapter 2

Sports and Entertainment Economics economic utility the amount of satisfaction a person receives from the consumption of a particular product or service Chapter 2

Types of Utility form utility time utility place utility CHAPTER 19 6/4/2018 Types of Utility form utility when the physical characteristics of a product or service are improved time utility making the product or service available when the customer wants it place utility the product is available where it is wanted possession utility the product or service is available at an affordable price Examples applied to movie industry: Form: 16-mm full length film to DVD, Time: several diff showings of same movie throughout the day, Place: available for purchase or rental for home viewing, Possession: affordable with convenient options – renting vs buying the movie with more than 1 payment option Chapter 2

List four types of economic utility. Chapter 2