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Risks and Surprises

This lesson focuses on the three main types of business risks—economic, human, and natural. It provides examples and discusses the elements of an effective risk prevention plan. Learn about various types of insurance, how to calculate premium costs, and compute merchandise losses based on book and inventory values over time. Additionally, assess the financial impact of on-demand repair calls, extended warranties, and service contracts. Equip yourself with strategies to handle business risks effectively and minimize potential financial losses.

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Risks and Surprises

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  1. Risks and Surprises Lesson 13

  2. Objectives • Give examples of the three main types of business risk – economic, human, an natural • Describe the elements of an effective risk prevention plan • Explain the different types of insurance and calculate the cost of premiums • Compute merchandise losses based on book value, inventory value, and sales over time • Weigh each of the following in terms of financial impact: on-demand repair calls, extended product warranties, and service contracts

  3. What is Business Risk? • Involves circumstances that can threaten financial loss or failure • Recognize potential risks and find a way to handle them with least negative impact

  4. Types of Business Risks • Economic Risks: • Caused by changes in the business climate • Recession • Depression • Recovery • Prosperity

  5. Human Risks: • Customer Risks: • Theft, bad checks, credit card fraud • Employee Risks: • Theft, carelessness and error, • Vendor Risks: • Error in shipments • Computer Risks: • Viruses, hackers

  6. Natural Risks: • Acts of nature • Earthquakes, fires, floods, hurricanes, landslides, and tornadoes

  7. Handling Risks • Risk Prevention: • Pre-employment screening and training of employees • Computer virus detecting software, passwords, and training employees about proper use • Safe workplace

  8. Risk Transfer: • Describes the process of giving the responsibility of dealing with certain business risks to another business • Insurance: • An agreement between an insurance company and a business for coverage of a particular business risk in exchange for s specified amount of money • Warranty: • A guarantee by a manufacturer that a product will perform • Service Contract: • An agreement between the retailer and the equipment dealer that covers routine, preventive maintenance and specific repairs to equipment

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