3 Types of Risks Economic and non-economic risks Pure and speculative risksControllable and uncontrollable risksInsurable and uninsurable risks
4 Economic and non-economic Economic riskCan result in financial lossPersonal riskCan result in personal losses such as health and personal well-beingProperty riskCan lead to loss of personal or business property including money, vehicles, and buildingsLiability riskRelates to harm or injury to other people or their property as a result of your actions
5 Pure and Speculative Risks Pure risk is a risk that presents the chance of loss but no opportunity for gain is a pure risk.WeatherSpeculative risk offers the chance either to gain or to lose.Investing in a new business, stock market
6 Controllable and Uncontrollable A risk that you can reduce or eliminate by your actions is controllableProtecting yourself from theft by adding security measuresUncontrollable risks cannot be reduced by your actions.Hailstorm
7 What is a risk?Risk is the possibility of incurring a loss.
8 OK, so how do you deal with risk? Avoid it!Transfer it.Insure the riskAssume the riskYikes! Gotta go!
9 Four Possible Ways to Deal with Risk MethodActivityAvoidChoose not to participate in the risky activity.TransferFind another business to complete the activity.InsurePurchases insurance to pay for any losses.AssumeComplete the activity with full responsibility.
10 Insurable RisksHow do individuals and businesses pay for large economic losses?Insurance – planned protection against economic losses.Provided by insurers or insurance companiesProvided on behalf of the insuredRisks covered are outlined in an insurance policyThe insured is also known as the policyholderThe payment for the policy is known as the premiumAsking for money when an insured loss occurs is called filing a claim.
11 Categories of Business Insurance PersonnelOperationsProperty
12 PersonnelHealthProtects against high costs of individual health care
13 PersonnelDisabilityProvides payments to employees who are not able to work for an extended period of time due to illness or injury
15 Property Insurance Commercial property Buildings Equipment Building contents, including inventoryProtection covers property losses resulting from fire, storms, accidents, theft, and vandalism.Special policies can also provide coverage for flood damage and earthquakes.
16 Vehicle InsuranceAutosTrucksOther business vehicles
17 Business OperationsInsurance to provide compensation for ongoing business expenses for temporary shutdown due to flood, fire, or other major problem.Liability insurance provides coverage for claims by others based on damages suffered because of business operations, employees, or products.
18 Uninsurable RisksThe costs of some risks are so high that a business cannot afford the cost of insurance protection.
19 What’s Uninsurable? Economic Conditions Recession, Depression Consumer DemandCan’t always count on consumer loyaltyCompetitors’ ActionsBetter advertising, better product, better service
20 What’s Uninsurable? Technology Changes Local Factors If you can’t adapt you can be left behind!Local FactorsConstruction in front of the business, new highway bypasses the town, laws, taxes . . .Business OperationsBad business practices can cause higher costs, low morale, poor customer image.
21 Managing Risks Awareness Continuous study of risk areas Stay aware of changes in the economy, competitors’ actions, and technologyCollect and review customer informationComplaints and requests
22 4 Strategies for Reducing Risk in International Business Carry out business in many countries (spread the love)Offer a range of products (eggs in more than one basket)Involve local business partnersEmploy local management
23 International Property Rights Exclusive rights to possess and use property and its profitsNobody else can interfere with the use of them.Intellectual propertyTechnical knowledge or creative workSoftware, clothing designs, music, books, and moviesPatentExclusive right of an inventor to make, sell, and use a product or process. Designed to encourage innovation and progress.
24 International Property Rights TrademarkA distinctive name, symbol, word, picture, or combination of these that a company uses to identify products or services.CopyrightProtects the original works of authors, composers, playwrights, artists, and publishers.CounterfeitingRefers to illegal uses of intellectual property, patents, trademarks, and copyrights.