Download Risk Management

Risk Management
The possibility of financial loss is risk.
The systematic process of managing
exposure to risk is risk management.
There are three types of business
risks—
economic
natural
and human
Various examples of economic
risks include:
1.
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6.
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8.
amount and type of competition
changing consumer lifestyles
population changes
limited usefulness or style of some
products
product obsolescence
government regulation
inflation
recession
Various types of natural risks are:
1.
2.
3.
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floods
tornadoes
hurricanes
fires
lightning
droughts
earthquakes
unexpected changes in normal weather
conditions
Various types of human risks are:
1. human mistakes
2. unpredictability of customers,
employees, and the work
environment (what does this mean?)
Handling Business Risks
There are four basic ways that businesses
can handle risks:
1. risk prevention and control
2. risk transfer
3. risk retention
4. risk avoidance
Risk prevention and control
1.
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Screen and train employees
Provide safe conditions and instruction
Prevent external theft
Control employee theft
Risk Transfer
 Purchase insurance
 Property insurance…what does that cover??
 Covers the loss of or damage to buildings, equipment, machinery, merchandise,
furniture, and fixtures
 Extended coverage….. what does that cover??
 An addition to the policy to add things not typically covered (water/sewer/theft)
 Business liability ….. what does that cover??
 Protects a business against liability from claims such as personal injury or
damage to others property
 Personal liability….. what does that cover??
 Protects individuals against liability from claims of injury as a result of their actions
 Product liability…. what does that cover??
 Protects against liability from claims of injury or damage to property caused by
products manufactured or sold by a company
 Fidelity bonds protect a business from employee
dishonesty. This is where the term “bonded”
originates.
 Performance bonds (also called surety bonds)
insure against losses that might occur when work
or a contract is not finished on time or as agreed.
 Life insurance pays money to beneficiaries upon
the insured passing.
 Credit insurance protects a business from losses
on credit extended to customers.
 Worker’s compensation is paid by employers to
cover employees in case of a job related injury or
illness.