Download ppt - Chapter 34 Risk Management 1 Marketing Essentials Chapter 34 Risk Management Section 34.2 Handling Business Risks

Chapter 34 Risk Management 1

Marketing EssentialsMarketing Essentials

Chapter 34 Risk Management

Section 34.2 Handling Business Risks


SECTION 34.2SECTION 34.2

What You'll LearnWhat You'll Learn

Handling Business RisksHandling Business Risks

The ways businesses handle risks


SECTION 34.2SECTION 34.2 Handling Business RisksHandling Business Risks

Why It's ImportantWhy It's Important

Businesses use certain strategies to help prevent, avoid, and protect against accidents, injuries, fires, thefts, defective products, and environmental disasters.



Key TermsKey Terms

insurance policy

extended coverage

fidelity bonds

performance bonds



There are four basic ways that businesses can handle risks:

risk prevention and control

risk transfer

risk retention

risk avoidance

Handling Business Risks



Risks can be prevented and controlled by:

screening and training employees

providing safe conditions and safety instruction

preventing external theft

deterring employee theft

Risk Prevention and Control



The best way to prevent the human risk of employee carelessness and incompetence is through effective employee screening, orientation, and training. Properly trained personnel are better able to meet customer needs and wants. This also helps to prevent the risk of lost sales through human error.

Screening and Training Employees



To prevent employee injuries, businesses can design stock and selling areas for efficient foot traffic and merchandise storage, and provide safety instruction on proper ways to lift and store merchandise

Providing Safe Conditions and Safety Instructions



Shoplifting involves the theft of merchandise from a business. Effective store layouts, security guards, and security devices can help prevent shoplifting.

Robbery is the stealing of money or merchandise by violence or threat. Robbery prevention measures including keeping limited cash on hand, installing video cameras, and hiring security guards.

Preventing External Theft



Employee theft is stealing merchandise, funds, or other company property. Effective prevention measures include:

Closed-circuit television systems used in conjunction with point-of-sale terminals to monitor employee transactions.

Preemployment screening to detect attitudes about honesty.

Controlling Employee Theft



Some business risks can be handled by transferring the risk to another business or to another party. Three of the most common risk transfers are:

insurance

product and service warranties

transferring risks through business ownership

Risk Transfer



Businesses can insure property and people against potential loss by purchasing an insurance policy—a contract between a business and an insurance company to cover a certain business risk. Businesses can buy several kinds of insurance:

Purchasing Insurance

Property insuranceBusiness liability insurancePersonal liability insuranceProduct liability insuranceFidelity bonds

Performance bondsLife insuranceCredit insuranceWorkers' compensation

insurance

Slide 1 of 5



Property insurance covers the loss of or damage to buildings, equipment, machinery, merchandise, furniture, and fixtures. It typically covers replacement costs and loss of income.

Business liability insurance protects a business against damages for which it may be held legally liable, such as an injury to other persons or damage to others' property.


Slide 2 of 5



Personal liability insurance covers damage claims made by customers and employees.

Product liability insurance protects against business loss resulting from personal injury from products manufactured or sold by a business.

Fidelity bonds protect a business from employee dishonesty.


Slide 3 of 5



Performance bonds (surety bonds) insure against losses that might occur when work is not finished on time or as agreed.

Life insurance is often purchased by a business owner to ensure that there will be sufficient funds to pay business debts in the event of the owner’s death.


Slide 4 of 5



Credit insurance protects a business from losses on credit extended to customers.

Credit life insurance pays the balance of any loans in the event the borrower dies.

Workers' compensation insurance is paid by employers to cover employee job-related injuries and illness .


Slide 5 of 5



Warranties are promises by the seller or manufacturer concerning the performance and quality of a product and protection against loss.

Product and Service Warranties



The corporate form of ownership offers the most protection from losses, because the stockholders, as owners, have only limited liability for business risks.

Transferring Risks Through Business Ownership



In some cases, it is impossible for businesses to prevent or transfer risks, so they retain or assume responsibility for them. This is called risk retention. This can happen because a business is not aware of the risk, underestimates the risk, or simply accepts the risk.

Risk Retention



Certain risks can be avoided by anticipating them in advance. Market research can lead businesses to conclude that investment in a product is not worth the risk.

Risk Avoidance


34.2 ASSESSMENTASSESSMENT

Reviewing Key Terms and Concepts

1. Identify the four ways businesses handle risk.2. Name four ways that companies prevent and

control risks.3. How can businesses reduce the human risk of

on-the-job injuries?4. What are the three principal ways to transfer risk?5. What is the difference between risk retention and

risk avoidance?


34.2 ASSESSMENTASSESSMENT

Thinking Critically

What important factors should a business consider when selecting an insurance company?


Marketing EssentialsMarketing Essentials

End of Section 34.2