Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ChapterChapter12 Risk Management 12.1 Business Risks 12.2 Insure Against Risks 12.3 Other Risks

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 2 Lesson 12.1 Business Risks Goals List and explain steps involved in preparing to face risks. Discuss types of theft and security precautions to take to protect your business.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 3 Vocabulary risk risk management risk assessment shoplifting bounced check

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 4 Dealing with Business Risks risk the possibility of some type of loss risk management taking action to prevent or reduce the possibility of loss to your business

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 5 Identifying Risks human risks caused by the actions of individuals natural risks caused by acts of nature economic risks occur because of changes in business conditions

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 6 Preparing to Face Risks When dealing with risk, choices you have include avoid the risk assume the risk transfer the risk

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 7 risk assessment looking at all aspects of your business and determining the risks you face Develop a Plan chain of command information the names of individuals who assess risk Determine What Can Go Wrong

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 8 specific instructions for how to shut down equipment prior to evacuation facility evacuation procedures specific training for emergency response personnel Develop a recovery plan. preferred method for reporting emergencies

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 9 communicate plans to personnel delegate responsibilities Communicate Your Plan

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 10 What should you do to prepare for business risks?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 11 Types of Theft shoplifting the act of knowingly taking items from a business without paying Consumers shoplift millions of dollars in merchandise annually.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 12 To deter theft, take the following precautions: Do not hire dishonest employees. Install surveillance systems. Establish a tough company policy regarding theft. Be on the lookout. Employee Theft

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 13 Most businesses are vulnerable to robberies. dead-bolt locks burglar alarms surveillance cameras Credit Card Fraud electronic credit authorizer Robbery

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 14 bounced check a check returned to a business by the bank because the check writer’s checking account had insufficient funds to cover the check amount prevention options accept only in-state checks charge customers a fee for bounced checks ask for identification refuse to accept checks Bounced Checks

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 15 How can you protect your business from theft?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 16 Lesson 12.2 Insure Against Risks Goals Identify risks faced by business owners. Explain why some business risks are uninsurable. Determine the different types of insurance you need for your business. Explain how to approach an insurance purchase.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 17 Vocabulary premium pure risk speculative risk controllable risk uncontrollable risk insurable risk

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 18 Classification of Risk premium a payment made to an insurance company to cover the cost of insurance the price paid to cover a specified risk for a specific period of time

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 19 Result of the Risk pure risk the chance of loss but no opportunity for gain speculative risk the chance to gain or lose from the event or activity

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 20 Controllability of the Risk controllable risk a risk that can be reduced or avoided by actions you take uncontrollable risk a risk on which actions have no effect

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 21 Insurability of the Risk insurable risk a pure risk faced by a large number of people the amount of the loss is predictable uninsurable risk when there is a risk of loss the amount of loss cannot be predicted

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 22 What is the difference between a pure risk and a speculative risk?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 23 Uninsurable Risks Economic Conditions changes in competition population shifts inflation or recession government regulations world events

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 24 Competitors’ Actions Technology Changes Local Factors Business Operations Consumer Demand

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 25 Why are some risks uninsurable?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 26 Types of Insurance Business Insurance business owner’s policy (BOP) Property insurance Business interruption insurance Liability protection Life Insurance Other Kinds of Insurance

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 27 What types of insurance can you purchase for your business?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 28 Buy Insurance Choose an Insurance Agent compare prices and policies choose an agent you trust Determine How Much Coverage You Need obtain sufficient insurance to cover property and debts Agents receive commissions based on the value of policies they sell. Be sure you actually need all of the insurance your agent recommends by talking to other business owners.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 29 How can you determine how much insurance you need?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 30 Lesson 12.3 Other Risks Goals Identify risks associated with credit. Explain how to manage risks at work. Describe strategies to reduce the risks of doing business internationally.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 31 Vocabulary trade credit consumer credit Federal Employees’ Compensation Act (FECA) exchange rate

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 32 Risks of Credit Debtor-creditor relationships can be voluntary when a business extends credit to customers involuntary when the delivery driver of a small business is at fault in a traffic accident the business may be required to provide compensation to the injured person

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Credit trade credit when one business allows another business to buy now and pay later often a higher price than the cash price consumer credit when a retail business allows its customers to buy merchandise now and pay for it later Chapter 1 Slide 33

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 34 secured loans installment loans unsecured loans credit cards the credit card company pays for the amount of the purchase the business pays a fee to the credit card company the credit card company is responsible for collecting the money from the customer loans

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 35 Credit Policies Credit policies need to be established to help reduce risks. A customer’s creditworthiness needs to be established prior to being granted a credit card.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 36 Previous credit history Employment record Assets owned Money available for making payments Financial references Factors to consider when determining whether a customer is creditworthy include:

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 37 an expense to the business decrease net income Uncollectible Accounts

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 38 How can a business owner reduce the risks of offering credit?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Risks on the Job Many workplaces have risks. Any harm suffered by employees at the workplace is considered to be a work- related injury. Chapter 1 Slide 39

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 40 a law that provides benefits to employees who have suffered work-related injuries or occupational diseases payment of medical expenses and compensation for lost wages benefits to dependents of employees who die from a work-related injury or disease Federal Employees’ Compensation Act (FECA)

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 41 Worker’s Compensation Worker’s compensation usually provides coverage for: medical bills a percentage of lost wages vocational retraining death benefits for survivors

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 42 medical expenses for on the job injuries a percentage of lost wages if an employee is left permanently disabled, either lump-sum payment or long-term benefits Coverage provided by workers’ compensation includes:

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 43 self-inflicted suffered while under the influence of alcohol or illegal drugs suffered during a fight that the injured employee started suffered while disobeying orders suffered while committing a crime suffered while not on the job Generally, the following injuries are not covered by workers’ compensation:

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 44 The injured employee must notify the employer. The employee must follow doctor’s orders. The employee must file the claim. Filing a Claim

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 45 What is the purpose of workers’ compensation insurance?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 46 Risks in International Business differences in language legal and cultural differences Product modifications might be required to meet the needs of global trade.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 47 exchange rate the amount of one country’s currency that can be traded for one unit of currency in another country travel and shipping expenses may be high different currency systems

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 48 Strategies for Dealing With International Markets Seek government assistance to answer your questions about international business. Conduct business in multiple countries. Work with local business partners.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 49 Employ local management. Learn about the other country’s culture. Comply with international labor standards.

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 50 What are some of the challenges of competing internationally?

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 51 PERFORMANCE INDICATORS Describe legal issues affecting businesses Describe the nature of legally binding contracts

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 52 Demonstrate honesty and integrity Explain business ethics in product/service management Demonstrate responsible behavior

Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 12 Slide 53 THINK CRITICALLY 1.What is the conflict of interest in this case? 2.Why should Beautiful Spaces pay the city of Lincoln? 3.What compromise could the city propose to reduce the fines? 4.How can the city avoid this situation in the future?