Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE CHAPTER Overview of Risk Management Insurable Risks Uninsurable Risks Risk Management

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Overview of Risk Management Learning Targets Identify the types of risks facing businesses. Describe ways that businesses can deal with risks. 14-1

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 14 3 IDENTIFYING RISKS  Types of risks  Economic – results in financial loss 1)Personal – health/well-being 2)Property – money, vehicles, buildings 3)Liability – harm to others  Non-economic risks – inconvenience or embarrassment but not financial  Pure – chance of loss but no gain  Weather  Speculative risks – chance for gain or loss  Investing money

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE  Insurable and uninsurable – people look for ways to protect themselves.  If large number of people face a given risk, it is insurable.  If a risk is not common and amount cannot be predicted, it is uninsurable. Chapter 14 4

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 14 5 DEALING WITH RISKS Avoid the risk – need to be aware of potential risks and make decisions Transfer the risk – activity may occur (offering credit) that you cannot afford to risk so you transfer it (to a bank, etc.) Insure the risk – buy insurance Assume the risk – if company suffers loss, they’ve decided to deal with it if it happens

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 14 6 Possible Ways to Deal With Risk

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Insurable Risks Learning Targets Recognize important insurance concepts. Describe several types of business insurance. 14-2

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 14 8 PURCHASING INSURANCE Insurance basics –  Insurance companies provide planned protection  Company’s pay a premium Insured losses – consumers and businesses can buy insurance to cover almost any kind of economic loss  Professional athletes, writers  Vehicle, property, health, life, liability

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter 14 9 BUSINESS INSURANCE  Insuring personnel – health and well-being of employees and managers/lost time at work  Health insurance  Disability insurance  Life insurance  Insuring property – commercial property insurance protects against fire, storms, accidents, thefts, vandalism; also covers company vehicles, etc.  Insuring business operations – actions that result in accidents, injury or other losses

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Uninsurable Risks Learning Targets Describe why some business risks are uninsurable. List the strategies a company can use to reduce the risks of doing business internationally. 14-3

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter IDENTIFYING RISKS  Types of uninsurable risks Economic conditions – weak or strong Consumer demand – preferences change Competitors’ actions – reduces pricing, major advertising Technology changes – put new technology into place; accept on-line payments, download music, etc. Local factors – street repair/construction, price of utilities rise Business operations – low morale, increased turnover, labor relation trouble, out of control expenses

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter MANAGING RISKS Inform everyone in the business of the types of risks that are particularly important to their part of the operations Implement measures to gather information and spot possible problems Inspect facilities and equipment Be active in local communities – collect and review customer information; maintain positive image Build relationships with government officials – be aware of changes in law; zoning; future growth

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE Chapter RISKS IN INTERNATIONAL BUSINESS Strategies for reducing risk – do business in several countries; offer a range of products; involve local businesses International property rights – illegal knock- offs; counterfeiting; using products illegally