Presentation on theme: "Factors Effecting Profit Financial Risk. Risking It All Risk Possibility of financial gain or loss or personal injury Businesses that do not profit."— Presentation transcript:
Risking It All Risk Possibility of financial gain or loss or personal injury Businesses that do not profit must close Personal injury can occur if businesses do not take the appropriate safety precautions Businesses must consider: Natural risk Human risk Economic risk
Natural Risk Weather conditions that cannot be avoided Tornadoes Blizzards Hurricanes Floods Droughts Ice Storms Less catastrophic weather conditions can cause problems Heavy thunderstorms Dangerous lightening *Can you cite some recent examples?
Human Risk Customer dishonesty Employee theft/dishonesty Employee incompetence Poor attitudes Poorly trained Shoplifting Credit card fraud Bad checks How do businesses attempt to manage these types of risks?
Economic Risk Economic conditions Consumer lifestyles Individual purchases Discretionary income Demand Recalled products Research to find a recent recall. What effect did the recall have on the business and the consumer?
Gain or Loss risk Gain example A sports team is very successful and attracts many fans Investors make a great deal of profit Loss example A flood closes a golf resort Investors cannot possibly gain from the event Speculative risk could result in either a gain or a loss as in the sports team example Pure risk occurs when there is no chance of a gain
Controllable Risk Prevent or reduce the occurrence of the risk Business has adequate safety measures in place Employees are well-trained in safety procedures Uncontrollable Risk Natural disasters Think of a place you visit often and name some safety procedures that business has in place. Can you think of any way to improve their safety?
Insurable Risk Pure risk for which the chances of loss are predictable and the amount of the loss can be estimated Fire Earthquake Flood Theft Injury Workers’ Compensation Uninsurable risk occurs when there is a chance that a loss could occur, but the dollar amount cannot be estimated
Managing Risk Risk management Preventing, reducing, or lessening the negative impacts of risk by using one of these strategies: Risk Avoidance Comply with safety laws Background checks on employees Safety training Video surveillance Security guards Controlled access Warning signs
Managing Risk, con’t. Risk Insurance Predictable losses Property Liability Theft The premiums from many businesses are pooled to and used to pay the losses that a few businesses experience.
Managing Risk, con’t. Risk Retention Uninsurable risks Breakdown of equipment Low demand Bad economy Products that won’t sell Owners realize that there are uncontrollable circumstances that can negatively impact the business Businesses must set aside funds for use in these circumstances