business risk 11th.pptx

8/19/2019 business risk 11th.pptx

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Risk?

Every business potentially faceschallenges, or risks.

The term business risk refers to thepossibility of inadequate prots oreven losses due to uncertainties e.g.,changes in tastes, preferences of

consumers, strikes, increasedcompetition, change in governmentpolicy, obsolence etc .

Business risks can beclassied by the in!uence byt"o ma#or risks$ internalrisks &risks arising from theevents taking place "ithin the

organi'ation( and e)ternalrisks &risks arising from the


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Business Risks Terms

• Risk – The possibility of a nancial loss.

• Risk management – The process of managing a

business’s exposure to risk in order

to achieve business objectives.• Business risk

– The possibility of business failure orloss.


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Economic Risks Risks that result from changes in

overall business conditions. Examplesof economic risks include:

• *ompetition !ore businesses that

"ould compete "ith your business openin the area.

•

*hanging consumer lifestyles Thelifestyle of the consumers in your areachanges due to ne" industry opening orclosing# ne" businesses# etc.


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Economic Risks continued

• overnment regulation ne"regulations can change the statusof your products. 'roducts can be

recalled because of safetymeasures such as baby productsor medicines.

•

Recession (ust as "ith in%ationthe availability of cash a&ectcustomer purchases.


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Natural Risks

Risks resulting from naturalcauses. Examples include:

• )loods

• Earth*uakes

• )ires

• +ightening

• ,roughts

• -nexpected changes in normal"eather


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Human Risks

Risks caused by human errors as

"ell as the unpredictability ofcustomers# employees# or the "orkenvironment.

• Employee theft

• Robbery

•

omputer crime• /tolen credit cards and bad

checks

•

0ccidents and injury


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Managing Business Risks


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Ways to Reduce Risk

• /esign "ork areas to reduce thechance of accident or re.

• Educate employees on safe use ofequipment.

• *heck and service safetyequipment on a regular basis.

• 0tress the limits of yourcompany1s products.

–

'rovide customers "ith instructions on theproper and safe use of products# as "ell as"arnings about possible ha1ards.


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Emergency -lanning• Businesses must$

– create emergency response plans tohelp handle emergency situations

more smoothly. – have procedures in place before a

crisis occurs.


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Ways to Reduce Risk

• 0hoplifting is a form of e)ternaltheft that involves taking itemsfrom a business "ithout payingfor them.

• Ways to reduce shoplifting. – Educate employees on shoplifting

prevention guidelines.

– 'rovide e&ective store layouts "ith

ade*uate lighting and orderly displays. – /tore expensive items in locked display

cases or tag expensive merchandise "ithelectronic devices.

– Employ the use of t"o$"ay mirrors#security personnel# or closed circuit


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Ways to Reduce Risk

• -urchase property insurance tocover$ – the loss of physical property such as cash#

inventory# vehicles# buildings. – real property such as buildings# land# and

xtures. – personal property such as vehicles# clothing#

furniture# je"elry.

• -urchase business interruptioninsurance to make up for$ – lost income if a business is shut do"n for


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23/-R03E 0T


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• The 2nsurance 0ct of 4567 "as therst legislation governing all forms ofinsurance to provide strict state

control over insurance business.

• 'urpose:$ to safe guard the interestof insured# setting the norms for

carrying out the business ofinsurance smoothly# !inimi1ingdisputes


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2!'8RT03E 8) 23/-R03E

• 'rovides protection against occurrence ofuncertain events.

• ,evice for eliminating risks and sharing

losses.• o$operative method of spreading risks.

• )acilitates international trade.

• /erves as an agency of capital formation.

• )inancial support.

• !edical support.

• /ource of employment.


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Types of insurance


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,istinction b9" double insurance and reinsurance

/ouble insurance Reinsurance

Risk The same risk and samesubject in insured by thepolicy holder.

The transfer of part ofthe risk by the insurer.

E)tent ofliability of the

insurer

The loss "ill be shared byall the insurers.

The re$insurer "ill beliable for a proportion ofpart of the loss.

To "hom

liable

Each insurer is directly

liable to the policy holder.

The re$insurer is liable

only to the rst insurer.

2b#ect 2t is a method of assuringthe benet of insurance.

2t is a method ofreducing of the risk ofthe insurer.


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+ife insurance:

• +ife insurance is a contract bet"een the policyo"ner and the insurer#

• "here the insurer agrees to reimburse theoccurrence of the insured individuals death or

other event such as terminal illness or criticalillness.

• The insured agrees to pay the cost in terms ofinsurance premium for the service. /pecic

exclusions are often "ritten in the contract to limitthe liability of the insurer# for example claimsrelated to suicide# fraud# "ar# riot and civilcommotion is not covered.


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Documents

business risk 11th.pptx