CHAPTER 14 1 CHAPTER 14 Risk Management 14

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CHAPTER 14 1 CHAPTER 14 Risk Management 14 -1 Overview of Risk Management 14

CHAPTER 14 1 CHAPTER 14 Risk Management 14 -1 Overview of Risk Management 14 -2 Insurable Risks 14 -3 Uninsurable Risks © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 14 2 KEY TERMS ● Risk- the possibility of incurring a loss ●

CHAPTER 14 2 KEY TERMS ● Risk- the possibility of incurring a loss ● Economic risk- possibility of financial loss ● Personal risk- possibility of personal loss ● Property risk- can lead to loss of personal or business property ● Liability risk- relates to harm or injury to other people or their property because of your action © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 14 3 KEY TERMS CONT. ● Pure risk- presents the chance of loss

CHAPTER 14 3 KEY TERMS CONT. ● Pure risk- presents the chance of loss but no opportunity for gain ● Controllable risk- can be reduced or eliminated by actions you take ● Uncontrollable risk- cannot be reduced by your actions ● Insurance- exchanges the uncertainty of a possible large financial loss for a certain smaller payment © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER INSURABLE/ UNINSURABLE 14 4 ● If a large number of people face a

CHAPTER INSURABLE/ UNINSURABLE 14 4 ● If a large number of people face a given risk and the cost of possible losses can be predicted, it is an insurable risk. ● If a risk is not common or if it is impossible to predict the amount of loss that could be suffered, it is an uninsurable risk. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

POSSIBLE WAYS TO DEAL WITH RISK Method Avoid Transfer Insure Assume CHAPTER 14 5

POSSIBLE WAYS TO DEAL WITH RISK Method Avoid Transfer Insure Assume CHAPTER 14 5 Activity Choose not to complete the risky activity Find another business to complete the activity Purchase insurance to pay for any losses Complete the activity with full responsibility © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 14 6 INSURANCE BASICS ● Insurer- agrees to take certain economic risks and

CHAPTER 14 6 INSURANCE BASICS ● Insurer- agrees to take certain economic risks and to pay for losses if they occur ● Insured- the person or business for which the insurer assumes the risk ● Policyholder- the person or company buying the policy ● Insurance policy- states the conditions to wich the insurance company and the policy-holder have agreed. ● Premium- the amount the policy-holder must pay for coverage ● Claim- a policy-holder’s request for payment for a loss that the insurance policy covers. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 14 7 BUSINESS INSURANCE ● Insuring personnel ● Health insurance- helps with the

CHAPTER 14 7 BUSINESS INSURANCE ● Insuring personnel ● Health insurance- helps with the high costs of individual healthcare ● Disability insurance- provides payments to employees who are not able to work for an extended period due to serious illness or injury. ● Life insurance- pays the amount of the insurance policy upon the death of the insured ● Insuring property ● Commercial property insurance- covers property losses resulting from fire, storms, accidents, theft, and vandalism ● Vehicle insurance- covers damages to the vehicles, owned by a business, and the occupants of the vehicle ● Insuring business operations ● Business interruption insurance- provides compensation for ongoing business expenses that occurs if a business has to temporarily shutdown due to a covered hazard ● Liability insurance- covers claims by others based on damages suffered because of business operations, employees, or products © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

IDENTIFYING AND MANAGING RISKS CHAPTER 14 8 ● Uninsurable risk factors ● Economic conditions-

IDENTIFYING AND MANAGING RISKS CHAPTER 14 8 ● Uninsurable risk factors ● Economic conditions- when the economy is strong, consumers will be able and willing to spend money. A downturn can quickly reduce sales and profits. ● Consumer demand- companies try to anticipate customer’s needs and preferences. If they make the right choices they can gain an advantage over the competition ● Competitors’ actions- being able to respond to competitors is crucial to having a successful business ● Technology changes- Constant updating of technology (software) ● Local factors- zoning changes, laws, road construction, all impact the operations of a business ● Business operations- day-to-day operations of a business can have a major impact on its success or failure © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 14 9 Property Rights ● Intellectual Property- technical knowledge or creative work ●

CHAPTER 14 9 Property Rights ● Intellectual Property- technical knowledge or creative work ● Patent- the exclusive right of an inventor to make, sell, and use a product or process ● Trademark- a distinctive name, symbol, word, picture, or combination of these that a company uses to identify products or services © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 14 10 Property Rights ● Copyright- protects the original works of authors, composers,

CHAPTER 14 10 Property Rights ● Copyright- protects the original works of authors, composers, playwrights, artists, and publishers ● Counterfeiting- Illegal uses of intellectual property, patents, trademarks, and copyrights. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

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