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What is Risk:

- the possibility of incurring a loss.

Examples:

loss of money or investments,
a tornado destroying your home & assets,
serious illness or injury affecting your life...

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Types of Risks:

- risks for unsuspected events and losses that businesses might face include:

A) Economic & non-economic

B) Pure & speculative

C) Controllable & uncontrollable

D) Insurable & uninsurable

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A) Economic Risk

Personal risk - personal losses such as health and personal well-being
Property risk - loss of personal / biz property, including money, vehicles, and buildings
Liability risk - harm or injury to other people or their property because of your actions

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B) Pure & Speculative

Pure risk - presents the chance of loss but no opportunity for gain (ex: severe weather)

Speculative risk - offers the chance for either loss or gain (ex: stocks or investments)

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C) Controllable / Uncontrollable

Controllable - you can take measures to prevent the risk or loss (ex: security guards)

Uncontrollable - your actions can’t necessarily prevent risk / loss (ex: early freeze on a farm)

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D) Insurable / Uninsurable

Can you insure yourself or your property against future risks or not?

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Controlling Risk:

Four possible ways to control risk are:

Avoid the risk - choose not to compete risky activity	Insure against risk - purchase insurance
Transfer the risk - find another biz to complete activity	Assume the risk - complete activity with full responsibility

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Question:

True or False:

Every risk you face results in a loss.

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Question:

Which of the following is not a type of economic risk?

personal risk
property risk
liability risk
all are economic risks

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Question:

Using another business to complete a risky activity is known as ________ the risk?

assuming
avoiding
transferring
insuring

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What to do?

Businesses share risks with other businesses & obtain financial protection of their assets by purchasing insurance.

Insurer vs. Insured

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Vocab to Know!

Policyholder
Insurance policy
Premium
Claim

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Insurance Options:

A. Personnel

1. Health

2. Disability (worker’s comp.)

3. Life Insurance

B. Property (building, vehicles, etc.)

C. Business Operations

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Question:

A new employee had an individual health insurance policy that costs $180 a month, plus $125 per month for spouse and 2 children. The company offers a group policy that costs $165 a month for an individual OR $286.50 for the entire family. The company contributes 10% of the cost toward either choice made.

A) how much does the group rate reduce the cost of health insurance for the entire family without the 10% contribution?

B) What is the yearly amount of insurance? What is the annual savings compared to the cost of the previous policy?

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Uninsurable Risks:

Economic conditions
Consumer demand
Actions of competitors
Technology changes
Local factors - closed roads, laws, taxes, etc.
Business operations - morale, turnover, poor image in the community

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Managing Uninsurable Risk

- implement risk management measures

- track economy, competitors, technology, etc.

- collect / review customer info, complaints, and requests

- monitor operating costs, credit, debt, etc.

- inspect facilities for safety

- carefully hire / train employees

- make backup copies of information / data

- be informed of laws, gov. changes, new regulations, etc.

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International Biz Risks:

- currency

- laws, policies, regulations, local rules

- turmoil, war, cold war

- illegal practices, theft &

counterfeits, & knockoffs

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Property Rights:

- the exclusive rights to possess and use property and its profits.

patent
trademark
copyrights

Counterfeiting - illegal uses of intellectual property, patents, trademarks, & copyrights.

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Question:

True or False:

Every risk a business faces can be insured.

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Question:

The growing use of the Internet as a business tool is an example of what type of biz risk?

economic conditions
technology change
consumer demand
business operations

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Question:

The exclusive right of an inventor to make, sell, and use a product or process is a:

trademark
copyright
patent
none of the above

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Homework:

1 page paper (if typed, 12-font, single-spaced)

research invention created in the last 500 years
name of product / the inventor / time frame invented
list all risks involved in the creation
outcome - successful or not?
target market (at the time)
reason it was invented
outcome today