Financing involves providing funds for business activities and investments. There are two main types of financing: equity financing which involves selling ownership stakes in a company, and debt financing which provides loans that must be repaid with interest. Business risks threaten profits and goals and can be internal or external. Key risks include strategic, compliance, reputational, financial, competition, and operational risks. Insurance provides protection from financial loss and is used to mitigate risks. It involves an insured paying a premium to an insurer for a policy that provides compensation in the event of specified losses.

1. Subject: Pharmaceutical marketing & Management
Topic: Financing, Risk, and Insurance
Submitted to: Ms. Mahpara Laique
Submitted by: Sahrish Jabbar
Roll no.: 02
2nd Semester, (Fall, 2022-24)

2.  Financing
What is Finance?
• Finance is a term for matters regarding the
management, creation, and study of money and
investments.
• Specifically, it deals with the questions of how an
individual, company or government acquires
money – called capital in the context of a business
– and how they spend or invest that money.

3. • Money required for carrying out business activities
is called as business finance.
• Business finance can be broadly defined as the
activity concerned with planning, raising,
controlling, and administering of funds used in
business.

4. What is Financing?
• Financing is the process of providing funds
for business activities, making purchases, or
investing.
• Financial institutions, such as banks, are in the
business of providing capital to businesses,
consumers, and investors to help them achieve
their goals.

5. • Financing also takes advantage of the fact that
some individuals in an economy will have a surplus
of money that they wish to put to work to generate
returns,
• While, others demand money to undertake
investment (also with the hope of generating
returns), creating a market for money.

6. Financing objectives:
• Regular and adequate supply of funds to the
concern.
• Purchasing of land, building, machinery and
equipment.
• Purchasing of raw materials and other materials.
• Paying salaries, wages and incidental charges.

7. • Maintaining stock and supply products.
• Ensuring shareholders of the organization to get
good returns on their investment.
• Optimum and efficient utilization of funds.

8. Types of financing
I. Equity Financing
II. Debt Financing
I. Equity Financing
• Another word for ownership in a company
• Companies like to sell equity because the investor
bears all the risk; if the business fails, the investor
gets nothing
• At the same time, giving up equity is giving up
some control

9. • In exchange for ownership, an investor gives their
money to a company and receives some claim on
future earnings
Advantages of Equity Financing
• The biggest advantage is that you do not have to
pay back the money.
• You do not have to make monthly payments, so
there is often more cash on hand for operating
expenses.
• Investors understand that it takes time to build a
business.

10. Disadvantages of Equity Financing
• When you raise equity financing, it involves giving
up ownership of a portion of your company.
• The riskier the investment, the more of a stake the
investor will want.
• Your company is no longer solely yours
• You will also have to consult with your investors
before making decisions.

11. II. Debt Financing
• Debt is also a common form of financing for new
businesses.
• Debt financing must be repaid, and lenders want to
be paid a rate of interest in exchange for the use of
their money.
Advantages of Debt Financing
• The lending institution has no control over how
you run your company
• Lender has no ownership.
• Once you pay back the loan, your relationship with
the lender ends.

12. Disadvantages of Debt Financing
• Adding a debt payment to your monthly expenses
assumes that you will always have the capital
inflow to meet all business expenses, including the
debt payment.
• Not good for small or new business setups
• You are always under pressure of returning the
debt.

13. Example of Financing
• Provided a company is expected to run well. For
example, if you run a small business and need Rs.
40,000/- of financing, you can either take out a Rs.
40,000/- bank loan at a 10% interest rate, or you
can sell a 25% stake in your business to your
neighbor for Rs. 40,000/-.
• Suppose your business earns a Rs. 20,000/-
profit during the next year. If you took the bank
loan, your interest expense (cost of debt financing)
would be Rs. 4,000/-, leaving you with Rs. 16,000/-
in profit.

14. • Suppose your business earns a Rs. 20,000/-
profit during the next year. If you took the bank
loan, your interest expense (cost of debt financing)
would be Rs. 4,000/-, leaving you with Rs. 16,000/-
in profit.
• Conversely, had you used equity financing, you
would have zero debt (and as a result, no interest
expense), but would keep only 75% of your profit
(the other 25% being owned by your neighbor).
Therefore, your personal profit would only be Rs.
15,000/-, or (75% x Rs. 20,000/-).

15.  Risk
• Business risk can impact a company's bottom line
and its reputation among consumers
• Companies face business risks when there is
potential uncertainty around strategy, profits,
compliance, environment, health and safety
• A business risk threatens a company's financial
goals
• Business risks can be categorized as internal or
external risks

16. Types of business risks
• Compliance risk
Violation of external laws or internal standards
• Legal risk
Failure to follow govt.’s rules
Results in expensive lawsuit & negative reputation
• Strategic risk
Business strategy is faulty or executives fail to follow a
business strategy
• Reputational risk
Results in profit decrease & lack of confidence among
shareholders

17. • Operational risk
Business’ day-to-day activities threaten to decrease its
profits
• Human risk
Employees’ failure to perform or theft or health issues
• Security risk
Failure to create or follow cyber-security strategies
Lack of software testing and security updates
• Financial risk
When company doesn’t perform debt management
or financial planning

18. Financial risks includes:
• Currency risk in international business dealings
because a foreign currency's value can depreciate
unexpectedly
• Default risk means taking out a business loan with
greater interest than a company can afford
• Liquidity risk is when it can't quickly convert its
assets into cash.

19. • Competition risk
When a competitor takes an increasing share of the
market for a product or service
Also called comfort risk
Executives fail to make continual improvements with
the company's products or services
• Physical risk
Threats to a company's physical assets, like
equipment, buildings and employees
Fire or natural disaster and lack of training on proper
equipment use

20. How to identify business risks?
a. Analyze business processes
b. Survey for risks at every level
c. Identify common risks in your industry
d. Record risks
e. Make strategies and implement them to minimize
recorded risks

21. Ways to minimize business risks
• Hire a business risk consultant.
• Develop a risk management strategy.
• Buy an insurance plan
• Perform research before committing to a loan.
• Document all relevant financial information.
• Stay informed of all laws and regulations

22.  Insurance
• Insurance is a means of protection from financial
loss.
• It is a form of risk management, primarily used
against the risk of uncertain loss.
• An entity which provides insurance is known as an
insurer, insurance company, insurance carrier
or underwriter.
• A person or entity who buys insurance is known as
an insured or as a policyholder.

23. • The insured receives a contract, called the
insurance policy
• The amount of money charged by the insurer to
the policyholder for the coverage set forth in the
insurance policy is called the premium.

24. Types of insurance
1- Life Insurance:
Life insurance covers the risk of death of a person by
various risks such as accident, disease etc.
2- General Insurance:
General insurance deals with movable and immovable
assets. It provides risk cover to immovable assets
(houses, shops, factories) and movable assets (goods
stored in shop, vehicle) etc.

25. Categories of general insurance
Motor insurance
Health insurance
Fire insurance
Crop insurance
Home insurance

26. Insurance companies in Pakistan
₋ Jubilee Life
₋ UBL Insurers Limited
₋ Adamjee Insurance
₋ Alfalah Insurance Company Ltd.
₋ Takaful Pakistan Ltd.
₋ Pak Qatar Takaful Ltd.
₋ State Life Insurance Corporation of Pakistan

27. Advantages of insurance
• Secured, stable and risk free business
• Financial assistance in case of an event occurs or if
the term expire
• Insurance companies mobilize savings of the public
• Financial support
• Medical support
• Insurance generate employment opportunities

28. References
• https://www.thehartford.com/business-
insurance/strategy/business-financing/debt-financing
• https://www.bfi.co.id/en/blog/risiko-finansial-adalah-
definisi-jenis-dan-tips-manajemen-yang-
• https://www.americanexpress.com/en-
us/business/trends-and-insights/topics/risk-
assessment/
• https://www.indeed.com/career-advice/career-
development/risks-business
• https://msh.org/wp-content/uploads/2013/04/mds3-
ch11-financing-strategies-mar2012.pdf
• https://www.simplilearn.com/financial-risk-and-types-
rar131-article
• https://www.investopedia.com/terms/i/insurance.asp