Mrs. A. Smith Risk Management

Risk Management Managing the risks that are involved in running a business. Risk are inevitable.

“If you construct a building, you run the risk that it will be destroyed by fire…”

2 Types of Risk Pure risk Speculative risk

Pure Risk Defintion: Examples: The threat of a loss to your business without any possibility of gain. Examples: The threat of employee theft, burgulary, and robbery are pure risks to a business. Natural disasters (such as floods, earthquakes, and tornadoes) also pure risks. Accidents involving employees and customers are also pure risks.

Speculative Risk Definition: Example: a risk that involves the chance of either profit or loss. Example: Most business decisions, such as marketing a new product, involve speculative risks. If the product succeeds in the market, you realize a profit. If it does not, you have losses.

“If you construct a building, you run the risk that it will be destroyed by fire.” What type of risk am I?

“What Kind of risk Am I?” Activity

Insurance A practice or arrangement whereby a company provides a guarantee of compensation for specified forms of loss, damage, injury or death. Types of insurance include automobile, health, renter's, homeowner's, disability and life.

4 Risk Management Methods Avoid Reduce Assume Shift

Risk Management Methods Avoid—the act of avoiding a crime Reduce—can not avoid risks, but reduce risks. Ex: lower chances of accidents