1. 14 Risk Management 14-1 Overview of Risk Management
C H A P T E R 14
Risk Management
14-1 Overview of Risk Management
14-2 Insurable Risks
14-3 Uninsurable Risks

2. KEY TERMS Risk- the possibility of incurring a loss2
Risk- the possibility of incurring a loss
Economic risk- possibility of financial loss
Personal risk- possibility of personal loss
Property risk- can lead to loss of personal or business property
Liability risk- relates to harm or injury to other people or their property because of your action

3. KEY TERMS CONT. 3
Pure risk- presents the chance of loss but no opportunity for gain
Controllable risk- can be reduced or eliminated by actions you take
Uncontrollable risk- cannot be reduced by your actions
Insurance- exchanges the uncertainty of a possible large financial loss for a certain smaller payment

4. INSURABLE/ UNINSURABLE4
If a large number of people face a given risk and the cost of possible losses can be predicted, it is an insurable risk.
If a risk is not common or if it is impossible to predict the amount of loss that could be suffered, it is an uninsurable risk.

5. POSSIBLE WAYS TO DEAL WITH RISK5
Method
Activity
Avoid
Choose not to complete the risky activity
Transfer
Find another business to complete the activity
Insure
Purchase insurance to pay for any losses
Assume
Complete the activity with full responsibility

6. INSURANCE BASICS 6
Insurer- agrees to take certain economic risks and to pay for losses if they occur
Insured- the person or business for which the insurer assumes the risk
Policyholder- the person or company buying the policy
Insurance policy- states the conditions to wich the insurance company and the policy-holder have agreed.
Premium- the amount the policy-holder must pay for coverage
Claim- a policy-holder’s request for payment for a loss that the insurance policy covers.

7. BUSINESS INSURANCE Insuring personnel Insuring property7
Insuring personnel
Health insurance- helps with the high costs of individual healthcare
Disability insurance- provides payments to employees who are not able to work for an extended period due to serious illness or injury.
Life insurance- pays the amount of the insurance policy upon the death of the insured
Insuring property
Commercial property insurance- covers property losses resulting from fire, storms, accidents, theft, and vandalism
Vehicle insurance- covers damages to the vehicles, owned by a business, and the occupants of the vehicle
Insuring business operations
Business interruption insurance- provides compensation for ongoing business expenses that occurs if a business has to temporarily shutdown due to a covered hazard
Liability insurance- covers claims by others based on damages suffered because of business operations, employees, or products

8. IDENTIFYING AND MANAGING RISKS8
Uninsurable risk factors
Economic conditions- when the economy is strong, consumers will be able and willing to spend money. A downturn can quickly reduce sales and profits.
Consumer demand- companies try to anticipate customer’s needs and preferences. If they make the right choices they can gain an advantage over the competition
Competitors’ actions- being able to respond to competitors is crucial to having a successful business
Technology changes- Constant updating of technology (software)
Local factors- zoning changes, laws, road construction, all impact the operations of a business
Business operations- day-to-day operations of a business can have a major impact on its success or failure

9. Property Rights 9
Intellectual Property- technical knowledge or creative work
Patent- the exclusive right of an inventor to make, sell, and use a product or process
Trademark- a distinctive name, symbol, word, picture, or combination of these that a company uses to identify products or services

10. Property Rights 10
Copyright- protects the original works of authors, composers, playwrights, artists, and publishers
Counterfeiting- Illegal uses of intellectual property, patents, trademarks, and copyrights.