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O The primary goal of every business is to make a profit O There is no guarantee this will happen Business Risk O The possibility of financial loss is.

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Presentation on theme: "O The primary goal of every business is to make a profit O There is no guarantee this will happen Business Risk O The possibility of financial loss is."— Presentation transcript:


2 O The primary goal of every business is to make a profit O There is no guarantee this will happen Business Risk O The possibility of financial loss is known as Business Risk

3 O The systematic process of managing an organization’s risks to achieve objectives in a manner consistent with public interest, human safety, environmental needs, and the law

4 O Economic Risk O Economic Risk – result from changes in overall business conditions O Natural Risk O Natural Risk – changes caused by natural occurrences O Human Risk O Human Risk – changes caused by employee dishonesty, errors, mistakes, or omissions as well as the unpredictability of customers or the workplace itself

5 O Changes include: O The level or type of competition O Changing consumer lifestyle O Population changes O Inflation O Recession O Limited usefulness or style of product O Product obsolescence O Government regulation

6 O Competition O Failure to keep up with competition leads to lost sales O New foreign completion threatens business O Products can be produced cheaper over seas

7 O Consumer lifestyle and population change O Must adapt to changing want and needs of the consumer O A change in population could mean an increase or a decrease in potential consumers O New communities (Ashburn) O Aging communities (rural towns)

8 O Limited Usefulness and Product Obsolescence O Products inevitably become outdated O VCRs O Atari O Cassette tapes O New products are always being developed O The development of more advanced products makes older ones no longer useful O Film cameras, typewriters, VCRs, portable stereo

9 O Recession and Inflation O Businesses in areas with high unemployment will suffer because less people are spending O If prices for basic products rise, people will have less disposable income

10 O Government Laws and Regulations reduce overall profits O Special licenses and permits O Street and Sewer Improvements O Environmental Clean-up O Parking O Product Recalls

11 O Results in the loss or damage of property and may cause businesses to be shut down. Catastrophes such as: O Floods O Tornados O Hurricanes O Fires O Lightning O Drought O Earthquakes

12 O Sometimes natural risks are caused by people: O Power outages O Civil unrest O Oil spills O Arson O Terrorism O War

13 O Businesses can insure against unexpected losses from some natural risks, but not all O Business insurance typically doesn’t cover acts of war or riot O Special insurance is often needed to cover flood and earthquake damage

14 O Weather is an important natural risk to consider O Some businesses and products depend on predictable weather conditions for success O Ski resorts rely on snow fall O Beach resorts affected by hurricanes O Farmers require sufficient rainfall

15 O Range from the financial impact of robbery or embezzlement to job related illness or injury O Customer Dishonesty: O Customer Theft O NRF determined that retailers lose $15-$37 billion a year from shoplifters O Fraudulent Payment O Nonpayment of accounts

16 O Employee Risk: O Unethical business practices O Embezzlement O Misuse of company goods, resources or supplies O Misuse of company time

17 O Computer-Related Crime O Worms or viruses downloaded by employees accidently O Hackers or employees can penetrate secure networks and access proprietary company information or client lists O Training employees on privacy policies and the proper handling of confidential information is necessary to decrease risk


19 O Some business risks can be controlled or minimized by: O Screening and Training Employees O Providing Safe Conditions and Safety Instruction O Preventing External Theft O Deterring Employee Theft

20 O Screening Employees O Background Checks/Reference Checks O Pre-employment Tests O Drug Testing O Training Employees O Orientation, training and instruction to understand policies and procedures

21 O Providing Safe Conditions and Safety Instructions O Design safe employee work zone for traffic and storage O Training on proper ways to lift and store merchandise O Develop accident management programs O Check and correct hazards O Ensure compliance with state and federal regulations O First aid kits near workstations O Distribute written safety and health plans

22 O Preventing Theft O Largest and most common form of human risk O Lock up valuable merchandise O Adequate lighting O Tag products with anti-theft devices O Hire security personnel and install security devices

23 O Preventing Theft O Robbery: stealing of money or merchandise by violence or threat O Keep limited amounts of money on hand O Hire security guards O Set alarms and lock doors

24 O Employee theft represents 48% of all business losses due to theft O Prevention: O Closed circuit television O Cameras concealed in mannequins, ceilings or walls O POS terminals (generates computer reports) O Monitors voids, cash intake, sales and refunds

25 O Transferring the risk of loss to another business or party O Purchasing Insurance O Property Insurance – to protect buildings, equipment and machinery O Liability Insurance – to protect company from damages which they can be held legal responsible O Establishing Product Warranty Periods

26 O When a business retains, or assumes, the financial responsibility for the consequences of loss O Unsold merchandise after a change in trends O Damaged items returned or removed from the sales floor

27 O When a business refuses to engage in particularly hazardous activity O Can often be determined by market research O Is an investment/activity worth the risk

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