2.   Define Risk and Risk Management  List and Describe 3 Types of Risks  Know and Understand 4 Basic Ways to Handle and Control these Risks  List 3 types of Ways to Transfer Risks  Know the Difference Between Risk Avoidance and Risk Acceptance Lesson Objectives

3.  Risk - The possibility of financial loss Management - The business function used to plan, organize, and control all available resources to reach company goals Risk Management - The systematic process of managing an organization’s risk exposure to achieve objectives in a manner consistent with public interest, human safety, environmental factors, and the law. What is Risk Management?

4.  3 Types Economic Natural Human Kinds of Risks

5.   These risks occur from changes in overall business conditions.  This can include:  amount or type of competitor(s)  changing consumer lifestyle  population changes  government regulations  inflation  Recession  Unemployment Unemployment Economic Risks

6.  Natural risks are result from natural disasters or disruptions  floods  tornadoes  hurricanes  fires  droughts  lightning  earthquakes  even sudden abnormal weather conditions Indiana State Fair Cowboys Practice Field Natural Risks

7.  These are caused by human mistakes and errors, as well as the unpredictability of customers, employees, or the work environment This could include:  Theft  Injury on the job  Employee error  Negligence  Incompetence  Etc.  Lance Armstrong Lance Armstrong Human Risks

8. Ways to Handle Business Risks There are 4 principle ways to handle risks  Risk Prevention and Control (Loss Prevention)  Risk Transfer  Risk Acceptance  Risk Avoidance

9.   Screening and Training Employees  Providing Safe Conditions  Providing Safety Instruction  Preventing External Theft  Deterring Employee Theft  This is often called “Loss Prevention” in the business world Risk Prevention and Control

10. Risk Transfer 3 Common Risk Transfers  insurance  product/service warranties  transference through business ownership

11.   Insurance policy - contract that covers a business with a specific type of insurance reducing risks  Business liability - insurance protects a business against damages for which it may be held legally liable.  Personal liability - covers damages by customer and/or employees  Product liability - protects from personal injury caused by product manufactured or sold by the business  http://youtube.com/Y_FuLW2-EWA http://youtube.com/Y_FuLW2-EWA Insurance

12. Product/Service Warranties  Warranties are simply promises made by the seller or manufacturer with respect to the performance and quality of a product and protection against loss

13.   The total amount of risk the business must handle depends in part on the type of business ownership  For example, a entrepreneur who owns a sole- proprietorship assumes all the risk as where a stockholder in a corporation assumes only his percentage of the risk. Transference Through Ownership

14.   When the business assumes the loss responsibility into the upkeep of the company  Most companies pull out a certain percentage of their revenue for damages, loss to theft, and unsold items. Risk Acceptance

15.   Risks can be avoided by advance anticipation  Following market research can assist a business in making the decision on whether or not to invest in a product.  To determine whether the product is a low risk you must weigh the potential benefits against the potential risks Risk Avoidance

16.   Develop an overall Risk Management Plan for the business  Develop a specific Risk Management Plan for specific events that occur within the business  Revisit the plan regularly to update Risk Management Plan

17.   The three types of risks: economic, natural, human  The terms important to Risk Management:  risk - the possibility of financial loss  risk management - the process of how a business controls the risk of financial loss while staying consistent with the public’s interest, safety, environmental factors, and the law  There are more ways than one to handle risks effectively.  Loss prevention  risk transfer - insurance, warranties, and transferring ownership  risk acceptance - assume responsibility of loss  risk avoidance - anticipating product failure and not investing in product/service What We Have Learned