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Understanding Business Risks: Types, Control Measures, and Credit Policies

In the world of business, understanding different types of risks is crucial for success. This guide explores pure and speculative risks, such as accidents and stock market fluctuations. It discusses controllability and insurability as key elements in mitigating risks. Furthermore, it highlights the benefits and risks associated with offering credit to customers, including trade and consumer credit. It also examines credit policies, creditworthiness assessments, and challenges in international business like language barriers and compliance. Protect your business by understanding these essential concepts.

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Understanding Business Risks: Types, Control Measures, and Credit Policies

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Presentation Transcript

  1. Warm Up Show your work Work in Pairs

  2. Risks Possibility of some kind of loss

  3. Types • Human • Theft • Bounced Checks • Natural • Fire • Flood • Economic • Stock market crash • Competition moves in next door

  4. Classification • Result • Pure Risk - vehicle in an accident • Speculative Risk - stock market • Controllability • Do something to reduce the risk • Insurability • Policy to protect against a loss • Has to be predictable, with statistics

  5. Credit Risks

  6. Benefits of Offering Credit • May help increase sales

  7. Risks of Offering Credit • Will the overall sales increase? • Customers may not pay back the money owed

  8. Types of Credit • Trade Credit - business to business • Pay price higher than cash price because of lapse in time to produce and deliver • Consumer Credit – business to customer • Loans – lump sum • Credit Cards – credit limit and use as needed

  9. Credit Policies • Established to reduce risk • Who may have credit • Which products can be purchased with credit • Terms of payment, interest, and length of time • Credit application to determine credit worthiness (why?) • Cannot sell used items at original price • Business will lose money

  10. Other Risks • Workplace dangers • Accidents • International Business • Language barriers • Unfamiliar with laws and customs • Products may not meet needs of that market • Travel and shipping costs

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