12.1 Business Risks 12.2 Insure Against Risks 12.3 Other Risks Risk Management 12.1 Business Risks 12.2 Insure Against Risks 12.3 Other Risks

Goals List and explain steps involved in preparing to face risks. Lesson 12.1 Business Risks Goals List and explain steps involved in preparing to face risks. Discuss types of theft and security precautions to take to protect your business. Chapter 12

Vocabulary risk risk management risk assessment shoplifting bounced check Chapter 12

Dealing with Business Risks the possibility of some type of loss risk management taking action to prevent or reduce the possibility of loss to your business Chapter 12

Identifying Risks human risks natural risks economic risks caused by the actions of individuals natural risks caused by acts of nature economic risks occur because of changes in business conditions Chapter 12

Preparing to Face Risks When dealing with risk, choices you have include avoid the risk assume the risk transfer the risk Chapter 12

Determine What Can Go Wrong risk assessment looking at all aspects of your business and determining the risks you face Develop a Plan chain of command information the names of individuals who assess risk Chapter 12

Develop a recovery plan. preferred method for reporting emergencies specific instructions for how to shut down equipment prior to evacuation facility evacuation procedures specific training for emergency response personnel Develop a recovery plan. Chapter 12

Communicate Your Plan communicate plans to personnel delegate responsibilities Chapter 12

What should you do to prepare for business risks? Chapter 1

Types of Theft shoplifting the act of knowingly taking items from a business without paying Consumers shoplift millions of dollars in merchandise annually. Chapter 12

Employee Theft To deter theft, take the following precautions: Do not hire dishonest employees. Install surveillance systems. Establish a tough company policy regarding theft. Be on the lookout. Chapter 12

Robbery Credit Card Fraud Most businesses are vulnerable to robberies. dead-bolt locks burglar alarms surveillance cameras Credit Card Fraud electronic credit authorizer Chapter 12

Bounced Checks bounced check prevention options a check returned to a business by the bank because the check writer’s checking account had insufficient funds to cover the check amount prevention options accept only in-state checks charge customers a fee for bounced checks ask for identification refuse to accept checks Chapter 12

How can you protect your business from theft? Chapter 1

Lesson 12.2 Insure Against Risks Goals Identify risks faced by business owners. Explain why some business risks are uninsurable. Determine the different types of insurance you need for your business. Explain how to approach an insurance purchase. Chapter 12

Vocabulary premium pure risk speculative risk controllable risk uncontrollable risk insurable risk Chapter 12

Classification of Risk premium a payment made to an insurance company to cover the cost of insurance the price paid to cover a specified risk for a specific period of time Chapter 12

Result of the Risk pure risk speculative risk the chance of loss but no opportunity for gain speculative risk the chance to gain or lose from the event or activity Chapter 12

Controllability of the Risk controllable risk a risk that can be reduced or avoided by actions you take uncontrollable risk a risk on which actions have no effect Chapter 12

Insurability of the Risk insurable risk a pure risk faced by a large number of people the amount of the loss is predictable uninsurable risk when there is a risk of loss the amount of loss cannot be predicted Chapter 12

What is the difference between a pure risk and a speculative risk? Chapter 1

Uninsurable Risks Economic Conditions changes in competition population shifts inflation or recession government regulations world events Chapter 12

Consumer Demand Competitors’ Actions Technology Changes Local Factors Business Operations Chapter 12

Why are some risks uninsurable? Chapter 1

Types of Insurance Business Insurance Life Insurance business owner’s policy (BOP) Property insurance Business interruption insurance Liability protection Life Insurance Other Kinds of Insurance Chapter 12

What types of insurance can you purchase for your business? Chapter 1

Buy Insurance Choose an Insurance Agent compare prices and policies choose an agent you trust Determine How Much Coverage You Need obtain sufficient insurance to cover property and debts Agents receive commissions based on the value of policies they sell. Be sure you actually need all of the insurance your agent recommends by talking to other business owners. Chapter 12

How can you determine how much insurance you need? Chapter 1

Goals Identify risks associated with credit. Lesson 12.3 Other Risks Goals Identify risks associated with credit. Explain how to manage risks at work. Describe strategies to reduce the risks of doing business internationally. Chapter 12

Vocabulary trade credit consumer credit Federal Employees’ Compensation Act (FECA) exchange rate Chapter 12

Risks of Credit Debtor-creditor relationships can be voluntary when a business extends credit to customers involuntary when the delivery driver of a small business is at fault in a traffic accident the business may be required to provide compensation to the injured person Chapter 12

Types of Credit trade credit consumer credit when one business allows another business to buy now and pay later often a higher price than the cash price consumer credit when a retail business allows its customers to buy merchandise now and pay for it later Chapter 1

loans credit cards secured loans unsecured loans installment loans unsecured loans credit cards the credit card company pays for the amount of the purchase the business pays a fee to the credit card company the credit card company is responsible for collecting the money from the customer Chapter 12

Credit Policies Credit policies need to be established to help reduce risks. A customer’s creditworthiness needs to be established prior to being granted a credit card. Chapter 12

Factors to consider when determining whether a customer is creditworthy include: Previous credit history Employment record Assets owned Money available for making payments Financial references Chapter 12

Uncollectible Accounts an expense to the business decrease net income Chapter 12

How can a business owner reduce the risks of offering credit? Chapter 1

Risks on the Job Many workplaces have risks. Any harm suffered by employees at the workplace is considered to be a work-related injury. Chapter 1

Federal Employees’ Compensation Act (FECA) a law that provides benefits to employees who have suffered work-related injuries or occupational diseases payment of medical expenses and compensation for lost wages benefits to dependents of employees who die from a work-related injury or disease Chapter 12

Worker’s Compensation Worker’s compensation usually provides coverage for: medical bills a percentage of lost wages vocational retraining death benefits for survivors Chapter 12

Coverage provided by workers’ compensation includes: medical expenses for on the job injuries a percentage of lost wages if an employee is left permanently disabled, either lump-sum payment or long-term benefits Chapter 12

Generally, the following injuries are not covered by workers’ compensation: self-inflicted suffered while under the influence of alcohol or illegal drugs suffered during a fight that the injured employee started suffered while disobeying orders suffered while committing a crime suffered while not on the job Chapter 12

Filing a Claim The injured employee must notify the employer. The employee must follow doctor’s orders. The employee must file the claim. Chapter 12

What is the purpose of workers’ compensation insurance? Chapter 1

Risks in International Business differences in language legal and cultural differences Product modifications might be required to meet the needs of global trade. Chapter 12

different currency systems exchange rate the amount of one country’s currency that can be traded for one unit of currency in another country travel and shipping expenses may be high Chapter 12

Strategies for Dealing With International Markets Seek government assistance to answer your questions about international business. Conduct business in multiple countries. Work with local business partners. Chapter 12

Comply with international labor standards. Employ local management. Learn about the other country’s culture. Chapter 12

What are some of the challenges of competing internationally? Chapter 1

PERFORMANCE INDICATORS Describe legal issues affecting businesses Describe the nature of legally binding contracts Chapter 12

Demonstrate responsible behavior Demonstrate honesty and integrity Explain business ethics in product/service management Chapter 12

THINK CRITICALLY What is the conflict of interest in this case? Why should Beautiful Spaces pay the city of Lincoln? What compromise could the city propose to reduce the fines? How can the city avoid this situation in the future? Chapter 12