Ppt business risk


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Ppt business risk

  1. 1. Business Risk<br />May 3, 2010<br />
  2. 2. What is Risk?<br />Risk – the possibility of loss or injury<br />Business Risk – risk of loss that is naturally incurred by owning or operating a business<br />
  3. 3. Risk Management<br /> the systematic process of managing risk to achieve your business objectives<br /> Risk cannot be totally eliminated, but it can be reduced and managed.<br />
  4. 4. Types of Risk<br />Insurable vs. Uninsurable<br />Controllable vs. Uncontrollable<br />
  5. 5. Insurance<br />Insurable Risk<br />Uninsurable Risk<br />Meets an insurance company’s criteria for coverage<br />Examples: <br />property insurance<br />vehicle insurance<br />renter’s insurance<br />Unacceptable to insurance carriers because the likelihood of loss is too high<br />Example: Store owners of shops in flood zones might have difficulty finding insurance.<br />
  6. 6. Out of Control?<br />Controllable Risk<br />Uncontrollable Risk<br />Occurs when conditions can be controlled to minimize the chance of harm<br />Example: <br /> Environmental damage can often be prevented.<br />Cannot be reduced or prevented<br />Example: <br />The risks of doing business in a global marketplace cannot be controlled.<br />
  7. 7. Other Types of Risk<br /><ul><li>Pure Risk
  8. 8. Economic Risk
  9. 9. Human Risk
  10. 10. Natural Risk</li></li></ul><li>Pure Risk<br />Threat of loss with no opportunity for gain<br />Examples include:<br />Employee theft<br />Burglary<br />Bad checks<br />Accidents involving customers or employees<br />
  11. 11. Economic Risk<br />Occurs when there is likelihood of financial loss<br />May result from changes in overall business conditions<br />Example: If a competitor offers more features, other businesses need to change their product or face losses.<br />Other Economic Risks<br />Personal Risk<br />Property Risk<br />Liability Risk<br />
  12. 12. Human Risk<br /> Risk of harm caused by human mistakes, dishonesty, or other factors attributed to people.<br />Customer Dishonesty<br />theft, fraudulent payment, non payment<br />Employee Risk<br />incompetence, shoplifting, accidents, fraud, computer-related crimes<br />
  13. 13. Natural Risk<br />The possibility of a catastrophe caused by natural elements that can cause damage or loss of property.<br />Examples include floods, tornados, hurricanes, fires, lightning, droughts, earthquakes, etc.<br />Other examples might include power outages, oil spills, arson, and terrorism.<br />
  14. 14. Think about human risk. What are the biggest concerns a business like your training station might have? How does your training station handle it?<br />Think about it!<br />
  15. 15. Planning Risk Management<br />
  16. 16. GAME TIME!<br />Divide into three groups (4 to 6 students per group). You will be taking risks in either The Game of Life or Monopoly!<br />Your daily participation grade for today will be based on your participation in the game. Have some fun! <br />The winner in each group will receive 10 points of extra credit… yay!<br />
  17. 17. Handling Risk<br />There are 4 ways to handle risk. Most businesses use a combination of these methods.<br />
  18. 18. Risk Avoidance<br />Involves thinking about the consequences of decisions<br />Businesses avoid risk by not engaging in hazardous activities.<br />Example: Market research can lead a business to conclude that investment in a product or service is not worth the economic risk.<br />
  19. 19. Risk Reduction<br />Retail stores place electronic tags on expensive merchandise to discourage theft.<br />Business owners reduce risk by designing work areas to lower the chances of accidents or fires.<br />Managers educate their employees about the safe use of equipment.<br />
  20. 20. Reducing Hiring Risk<br />How do businesses reduce risk from employee carelessness and incompetence?<br />Hiring sometimes involves:<br />Employee screening<br />Employee orientation / training<br />Background checks<br />Drug testing<br />
  21. 21. Risk Retention<br />Bearing financial responsibility for the consequences of loss<br />Certain types of risk are impossible to avoid.<br />Example: Businesses retain the risk that customer tastes will change and merchandise will not sell. They might underestimate the risk and end up stocking too much merchandise.<br />
  22. 22. Risk Transfer<br /> Insurance provides a way to transfer a risk of loss to an insurance company.<br />Divides possible loss among large numbers of people or companies<br />Each company pays a fee for protection<br />