8.01 summarize the concept of risk management. risk possibility of a _____ loss or failure...
TRANSCRIPT
Risk
• Possibility of a _____ loss or failure
• Individuals or companies willing to take risk because of opportunity for success or financial gain
1. Economic risk
• Risk associated with the possibility of loss due to a change in the ________
• A business might experience monetary loss due to changes in overall business conditions
Economic risk involves…
Competition Changing
consumer lifestyles
Inflation Population
changes
Limited usefulness or popularity of some products
Obsolescence _____________ Recession
Natural risk involves…
• Drought
• ________
• Hurricanes
• Tornadoes
• Lightning
• Fires
• Other unexpected changes in normal weather conditions
Example of natural risk
• Lubbock Texas, 2002, Brittany Spears concert was cancelled due to power outage from a storm
Human risk
• Risks affiliated with ______ or endorsers might include dishonesty, incompetence, accidents, illness or negligence
Examples of human risk:• _________• unpredictability • Employee
unpredictability• Human mistakes
including dishonesty, fraud, accidents
• Lowes Motor Speedway removed first 2 rows of seats on front stretch to protect fans from flying debris
Risk management plan• Important considerations to be
included in a plan:1. Identify the potential business risks
2. Measure the prioritize business risks
3. Determine how to effectively handle each risk
4. ______ risk management plan
Risk prevention involves:
1. Screening potential employees
• _____ and aptitude tests are the two most common ways businesses screen employees
Risk prevention involves:
3. Providing safe conditions and safety instructions for employees
• Proper safety instruction can reduce the possibility of on-the-job accidents
Risk prevention involves:
4. Preventing external theft
• Shoplifting is stealing merchandise for a business
• ______ is stealing merchandise or money through the use of force or threat
Risk prevention involves:
5. Preventing internal theft
• Dishonest employees could steal merchandise (larceny) or money (_____) from a company
Risk transfer accomplished by:
1. Purchasing insurance against a potential loss.
• Examples include___________________________
Risk transfer accomplished by:
2. Using warranties to transfer risk to manufacturer
• A warranty is a _______guarantee that a product or service will meet certain quality standards
Risk transfer accomplished by:
2. Warranties (con’t)
• If product or service does not meet the expectations of consumer, or if product fails, manufacturer is held responsible
• Most warranties have specific time or use limits
Risk transfer accomplished by:
3. Business ownership
• Type of business determines how much risk is incurred by each owner
• In a sole proprietorship or partnership, all risks assumed by________
Risk transfer accomplished by:
3. Business ownership (con’t)
• In contrast, a corporation distributes risk among all of its shareholders.
Risk retention
• Involves assuming or acknowledging a business risk and outcome
• Some risks are inevitable or uncontrollable
• Some risks _____ be transferred, avoided, insured or prevented